Selangor overpaying RM2b for water deal, amounts to bailout for Puncak Niaga, reveal PKR paper

Selangor should not cough up RM2 billion to fund the RM9.65 billion takeover of four water concessionaires as the deal amounts to a bailout of Puncak Niaga, which also owns water utility Syabas, according to an internal PKR document.

The document sighted by The Malaysian Insider is a briefing note for the party's leadership that is now debating Selangor Menteri Besar Tan Sri Abdul Khalid Ibrahim's haste in signing the water-restructuring pact with Putrajaya in February.

It showed that the Selangor agreement agreed to raise the payment for equity or profit for Puncak Niaga Bhd from RM1.07 billion in February 2013 to RM1.638 billion in March 2014.

"In the space of several months, the Selangor government had raised the profit compensation to Puncak Niaga (controlled by a personality close to Umno) by RM568 million," the document revealed, referring to company founder, Tan Sri Rozali Ismail, who was a one-time Selangor Umno treasurer.

It noted that Puncak Niaga's latest financial records for the year-ending December 31, 2012, showed the firm was in red with RM75 million, after deducting assets of RM13.4 billion and final profit of RM232.7 million from its RM13.5 billion total liabilities.

"It means that if the Puncak Niaga group was sold in the open market without any negotiations, its valuation based on its profit, assets and liabilities record would be a company without any value.

"The offer in the MoU instead gives a profit compensation up to RM1.638 billion to the Puncak Niaga group which is RM1.700 billion more than its market value based on its profit, assets and liabilities record," said the document.

But it also said that the Selangor government had cut the compensation offered to another concessionaire, SPLASH, by RM2.1 billion with an offer of just RM251 million.

"Because of that, the bigger reduction will most likely push SPLASH to reject the offer," said the document, adding that Selangor can then only hope Putrajaya would invoke Section 114 of the Water Services Industry Act (Wasia) to take over the water concessionaires' assets and determine the compensation.

It pointed out that Khalid had explained the hasty signing of the memorandum of understanding (MoU) with Putrajaya on February 26 was because of two reasons although it was not ratified by the state executive council.

The reasons are that Putrajaya did not want to delay the bond payments of the water concessionaires which were held by the federal government through convertible loans.

"This will make the Puncak Niaga group bankrupt," the document said.

The other reason was that Putrajaya wanted to speed up the Langat 2 project as its Japanese funders had threatened to pull back their loan, it added, referring to the multi-billion ringgit water-treatment plant to treat water piped from Pahang to alleviate water shortage in Selangor.

"If this was the main reason, the Selangor government is in a stronger position in the negotiations. If the federal government and Puncak Niaga harden their stand, it will be bankrupt and have a major impact on the federal government's economic record.

"All the more so the federal government's desperation in funding the Langat 2 project has made our negotiation powers stronger," the document said, adding that this would benefit Selangor citizens as the compensation payments would be less.

The document also said Khalid had admitted there were no exco papers that discussed the final contents of the MoU signed with Putrajaya.

"So, there is no approval recorded by the exco that gave the power to the menteri besar to sign the MoU on behalf of the Selangor government and the people," it said.

Selangor yesterday said it was willing to consider appeals by Puncak Niaga and Syabas for a review of the terms of the water-restructuring deal.

However, Khalid said the state would not increase its offer of RM9.65 billion to take over the four water concessionaires.

Both Puncak Niaga and Syabas are appealing to Selangor to review the terms before Putrajaya invokes Section 114 of Wasia.

"Selangor cannot increase its original offer of RM9.65 billion because any additional costs will have a negative impact on water tariffs," Khalid said.

"These additional costs will be a burden on the rakyat, especially the five million water users in Selangor, Kuala Lumpur and Putrajaya," he added.

Finding ways to deal with water crisis

With no end in sight for the lengthy water crisis, some consumers in Selangor are getting savvy at meeting their bathing and washing needs.

Some are taking their families to petrol stations to shower and do their laundry.

Others are doing the same at R&R stops within reach of their homes.

And some are even signing up with clubs and gyms just to use their shower facilities.

A petrol station operator in USJ said many people were coming there to bathe and collect water.

“These people are desperate for water and have none at home so I’m just trying to help,” he said.

“The station has not been hit by water cuts and we have three or four water storage tanks on the roof.”

A sales representative of a well-known gym, who asked not to be named, said some people had resorted to coming into the facility for its running water.

“We have had people come in to use the taps in our washroom and some have signed up just to gain access to our shower facilities,” he said.

The gym has several water tanks which allow it to stay operational during water cuts.

Several college students hit hard by the water rationing at their homes have started going to their campus to shower.

Jeang Sheng, 21, said his area had not received water for two weeks since the onset of rationing so he showers at UCSI University where he studies.

“Sometimes I go in earlier to shower before class; other times I stay back to shower after class,” he said.

He said his water woes were worsened by the inconsistent delivery times of water tankers serving his area.

“They seem to come at random times. They have delivered water at around midnight and even at 4am once,” he said.

“I try to preserve the water I’ve stored at home by showering at my campus.”

Some petrol stations and other places have had to put up signs telling people that they cannot bathe or collect water on their premises.

Md Khairi Selamat, Selangor Water Management Au­thority (Luas) director, had announced that there would be a water emergency declared in the state if major dams hit critical level.

The Sungai Selangor and Klang Gates dams each have just over two months of water sup­­­ply before they reach the danger zone.

Selangor water woes all Anwar’s fault, says state opposition leader

The Selangor opposition alleged today that it was constant meddling by state economic advisor Datuk Seri Anwar Ibrahim that led to the ongoing water crisis affecting some nine million people in Selangor and the federal territories of Kuala Lumpur and Putrajaya.

Selangor opposition chief Datuk Mohd Shamsudin Lias said it was because of Anwar’s adamant objection to the construction of the controversial Langat 2 water treatment plant that the state is now forced to ration its water due to dwindling supply.

“I fear the mentri besar faces a lot of pressure to derail the MoU. If it is stopped, it will only cause more problems... this plant is already delayed. If it is delayed further, what will happen?” Shamsudin said when met in the state assembly annex lobby.

The state and federal governments recently signed a Memorandum of Understanding, which aims to tackle the chronic water woes faced by residents in Selangor and the federal territories of Kuala Lumpur and Putrajaya.

Under the MoU, the federal government is to help the state acquire all water assets as part of the state administration’s ambitious water industry restructuring exercise, in exchange for state approval for the construction of the Langat 2 water treatment plant.

Shamsudin said Anwar had done nothing to contribute to Selangor’s economic growth, and instead, accused the latter of being obsessed with undermining the Barisan Nasional-led federal government.

“All the infrastructure already exists in Selangor to attract FDI (foreign direct investment). The state on its own is already attractive.

“There is no initiative by the economic advisor, who goes overseas not to lead investment missions for Selangor but to criticise the (federal) government.

“What is most sad, is that this advisor has caused much suffering and hardship and confusion in Selangor. Look at the Kajang move where he wanted to become MB... that does not help Selangor, that only destroys Selangor,” Shamsudin said.

Last February, Khalid and Energy, Green Technology and Water Minister Datuk Seri Maximus J Ongkili signed the MoU, paving the way for Selangor’s takeover of water assets currently owned by four concessionaires operating in the state under the Water Services Industry Act (WSIA) 2006.

The federal and state administrations are currently working out a forced takeover of three of the four concession holders — Syarikat Bekalan Air Selangor Bhd (Syabas), Puncak Niaga Sdn Bhd (PNSB) and Syarikat Pengeluar Air Selangor Holdings Bhd (Splash) — after they refused Selangor’s RM9.65 billion total offer.

Only state-owned Konsortium Abbas Sdn Bhd (ABBAS) agreed to the terms laid out by the state government.

The deal, however, was criticised by Pakatan Rakyat leaders — especially those seen to be aligned with Anwar — who argued that Selangor does not need to agree to the Langat 2 plant after talks with the three concession holders fell through.

Construction of the Langat 2 plant is currently on hold, pending the completion of the state’s water industry restructuring exercise.

State to consider water firms' plea

THE Selangor state government will consider a plea by water concessionaires Puncak Niaga Sdn Bhd (Puncak Niaga) and Syarikat Bekalan Air Selangor (Syabas) to take over their assets as long as it does not exceed the original offer of RM9.65 billion.

Menteri Besar Tan Sri Abdul Khalid Ibrahim said Syabas and Puncak Niaga had made the request via a letter through the Energy, Green Technology and Water Ministry on Monday.

"The concessionaires are asking the state government to reconsider the amount paid to them once Section 114 of the Water Services Industries Act 2006 is implemented."

Under the Act, the concessionaires will only get RM7.6 billion, or RM2 billion less than the initial offer of RM9.65 billion.
"The state government can reconsider the amount of payment that needs to be made for the take over but our offer still stands at RM9.65 billion and we are not planning to increase even a sen more

"This is because any more increase in the payment will have a negative effect in the state water tariff and affect more than five million users in the state," he said at the state assembly yesterday.

Khalid, however, gave his commitment that the state government would cooperate with the Federal Government in reaching a fair deal for the take over "so we can move on to further restructure the water industry to benefit the people in the long term".

On a related note, Khalid said the Langat 2 water treatment plant would be constructed simultaneously with the Hybrid Off River Augmentation System (Horas) project.

"The state and Federal governments are still in talks but we expect to come to an agreement soon. It's just that there is no black-and-white agreements yet, but my word is my promise and we will make this happen."

Khalid said the Langat 2 and Horas projects would double the amount of untreated water from the current 5,000 million litres per day to 10,000. Horas is one of three main projects the state government will carry out while waiting for the Langat 2 plant to be completed.

Is Selangor being taken for a ride in water deal, ask Pakatan politician

Has Putrajaya taken Selangor for a ride over the multi-billion-ringgit water deal that could see privatised concessions being nationalised?

That is the question asked by Pakatan Rakyat (PR) MPs and politicians who are overseeing the agreement between the federal Barisan Nasional (BN) administration and the Selangor government.

Recent statements from Putrajaya indicate that it does not see the terms of the deal the same way as Selangor does. Selangor continues to insist that the terms are still being followed.

At stake is who gets to run the lucrative but leaky Selangor water industry which supplies treated water to seven million consumers in Selangor, Kuala Lumpur and Putrajaya.

“The statements appear to contradict the memorandum of understanding,” said former Kuala Selangor MP Dr Dzulkefly Ahmad, on Putrajaya’s statements that the restructured industry will be run by a federal agency – the National Water Services Commission (SPAN).

Dr Dzulkefly, who was part of a Selangor water panel to restructure the industry, said under the MoU, signed on February 26, a state-owned company, (Kumpulan Darul Ehsan Berhad) would run the restructured industry.

“(The federal government) seems to be oscillating… There is some hesitancy on using Section 114 of WSIA,” said Klang MP Charles Santiago on whether the federal government would use the law to take over the four concessionaires currently managing the industry.

Santiago said Putrajaya was still reluctant to use WSIA because it would send a wrong message to the business community.

“It’s really confusing,” he said of the different statements coming out of Selangor and Putrajaya.

Santiago also said he had not been able to get a clear answer either from the Energy, Green Technology and Water Ministry on whether Selangor or Putrajaya would run the industry once it was restructured.

“The deputy minister (Datuk Mahadzir Khalid) refused to say one way or the other,” said Santiago, who had queried Mahadzir in the Dewan Rakyat on March 25.

Under the February 26 MoU with Selangor, Putrajaya is supposed to “facilitate” the takeover of the water industry.

This would reverse decades of privatisation of the industry and put the management of the industry fully under Selangor’s control through Kumpulan Darul Ehsan Berhad (KDEB).

Selangor government officials have in the past asserted that “facilitate” meant that Putrajaya would invoke Section 114 of the Water Services Act 2006.

The provision allows Putrajaya to take over the industry from the four concessionaires in the interest of the public.

The four companies are Puncak Niaga Holdings Bhd, Syarikat Bekalan Air Selangor Sdn Bhd, Syarikat Pengeluar Air Sungai Selangor Sdn Bhd and Konsortium ABASS Sdn Bhd.

Except for Syabas, all three companies operate plants that process treated water for seven million residents of Selangor, Kuala Lumpur and Putrajaya. Syabas manages the pipe and distribution network.

The Selangor government said that it wanted to manage every aspect of the industry, from managing the dams and rivers that supply raw water to the plants and pipes that process treated water.

However, on March 21, Energy, Green Technology and Water Minister Datuk Seri Maximus Ongkili said the ministry would take over the four water concessionaires but that the industry would be run by a federal government agency – SPAN, together with Pengurusan Asset Air Berhad and representatives from the Selangor government would run the industry for an interim of three years.

Ongkili made no mention of the fact that restructured industry would be handed over to KDEB.

The next day, Menteri Besar Tan Sri Abdul Khalid Ibrahim insisted that KDEB would, in the end, run the industry.

Khalid had said that Putrajaya and Selangor would send KDEB officers to join a team from Putrajaya who would “step in” the operations of the four.

The federal government and KDEB would go in together, but the Putrajaya would stand back and let KDEB manage it, Khalid had said.

Two days later, Santiago pressed Mahadzir on which plan, Ongkili’s or Khalid’s, Putrajaya was following.

“This clearly shows that something is amiss in the whole agreement,” said Santiago, who is also chairman of the Coalition against Water Privatisation.

However, until today, there has been no clarity. – April 1, 2014.