KUALA LUMPUR: The recently built Labu water treatment plant and dam in Negri Sembilan could turn into a RM168 million white elephant if the federal and Selangor governments do not resolve their dispute over water assets in the state, sources say. The Edge Financial Daily understands that the state government has refused the federal government extraction rights, connecting the treatment plant to the water pipes, which fall under the state’s domain.
The state wants the operation and maintenance of the plant but the federal government is opposed to this. “It is at a standstill, it cost a lot of money to build, now it’s not being utilized it can only be utilised if the two governments get their act together,” said one of the sources. Work on the dam and 110 million litre a day water treatment plant form part of the Kuala Lumpur International Airport (KLIA) alternative water supply scheme, on which construction began in July 2010 and was completed recently. The dam and water treatment plant were slated to shore up water supply to areas such as Salak Tinggi, Bukit Tampoi, Semenyih and the vicinity.
The contract for the building of the water treatment plant and dam was awarded to Salcon Engineering Bhd, a wholly owned unit of water player Salcon Bhd, and is believed to have cost RM88 million. However, Salcon’s job scope only involves the designing, procurement, construction, installation, commissioning, operation and maintenance, training and handover. Sources familiar with the water sector said the dam cost an additional RM80 million to build. However, it is not clear who built it. Tan Sri Rozali Ismail declined to comment on the issue. He has 41.2% equity interest in Puncak Niaga Holdings Bhd. Puncak has 70% equity interest in Syarikat Bekalan Air Selangor Sdn Bhd (Syabas).
Syabas has the mandate to supply treated water to Kuala Lumpur, Selangor and the federal capital Putrajaya. Rozali did say that there are problems with water supply in certain areas, and he will meet with the Federation of Malaysian Manufacturers and the Real Estate and Housing Developers Association of Malaysia to advise them on where water pressure is low or not available. “There are some areas in the Klang Valley that cannot be developed as a result of low water pressure. There are some new areas which have been developed that I cannot supply water. I will be holding a press conference soon,” was all he offered. Rozali, who is said to be close to the ruling Barisan Nasional coalition, has been at loggerheads with the Pakatan Rakyat state government since 2009.
The state opposed a 37% tariff hike for Syabas which was slated to kick in from January 2009. Selangor has attempted to revoke Syabas’ concession, stating that there have been breaches of key terms, as the non-revenue water targets are not being met. Rozali and Syabas have sued for compensation but the state is fighting the claims. has been sustained by soft loans from the federal government. For FY11, Puncak posted a net profit of RM9.32 million on the back of RM2.59 billion in revenue.
In FY10, it suffered a net loss of RM72.34 million from RM2.12 billion in sales. In the notes accompanying its financials, Puncak said the marginal profit in FY11 was attributable to higher revenue and profit from a rural water supply project. As at end December last year the company had cash and bank balances of RM1.27 billion and long-term debt amounting to RM5.04 billion and short-term borrowings amounting to RM471.17 million. Puncak gained 12 sen to close at RM1.47 last Friday.
This article appeared in The Edge Financial Daily, March 5, 2012.
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