The plan to consolidate Selangor's water sector is looking dimmer by the day amid new valuations for its water assets by the Selangor state government, industry observers say.
The RM12bil, which is how much the state values the assets going by its latest announcement reported over the weekend, is against the Federal Government's valuation of about RM1bil for the assets.
“The latest valuation by the state serves to add to the existing disagreements between the Federal Government and the Pakatan Rakyat-led state on this issue of water consolidation,” an observer said.
The crux of the issue while more political than anything else, largely hinges on who is the rightful party to consolidate the state's water assets and have control over its operations.
“I think the issue will remain unresolved for a very long time,” the observer added.
Sources said Pengurusan Aset Air Bhd (PAAB), which is the Federal Government's unit tasked to take over the water assets as part of the consolidation process was now focusing on the “bond issue” rather than the consolidation.
The bonds were issued to spearhead the consolidation of the water industry in Selangor.
Due to the ongoing issues in the process - which has been dragging for more than two years - bondholders which include institutions like the Employees Provident Fund and major funds had been getting jittery and as such, PAAB had offered to buy up the bonds from them.
The payment to the bondholders taking up PAAB's offer is expected to be made on June 30.
The nationwide water consolidation process essentially entails taking over the water assets and liabilities in the states from the water players, streamlining and consolidating the water services industry in the process.
In the case of Selangor, the process is far more complicated because its water sector is by far the most fragmented in the country.
The main parties involved are the Federal Government, state government and water players, with Puncak Niaga Holdings Bhd as the core company.
Puncak Niaga is said to be closely linked to Barisan Nasional, which adds political complications to the situation.
Water tariffs in Selangor have been a bone of contention since the process of consolidation started.
The finances of the state's water players are being stretched because a 37% proposed hike in water tariffs due in 2009 had not materialised as the state government claimed that principal concessionaire Syarikat Bekalan Air Selangor Holdings Sdn Bhd did not meet certain criteria for the hike.
The state intends on keeping tariff lows and control over Selangor's water assets can help it do so. It has so far made three official offers to take over the assets in the state.
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