Gamuda still in talks with Selangor on water deal

SHAH ALAM: The Selangor water restructuring exercise appears to be far from completion as Gamuda Bhd explains that discussions with the state government is still on-going, and is confident that the federal government will not invoke Section 114 of the Water Services Industry Act (WSIA) 2006 to take over its water assets.
According to Gamuda managing director Datuk Lin Yun Ling, the group is still holding out for a settlement amount which will see a loss for the group.
As a 40% owner of Syarikat Pengeluar Air Selangor Sdn Bhd (Splash), Gamuda holds the last piece of the Selangor water restructuring puzzle.
Puncak Niaga Sdn Bhd (PNSB), Syarikat Bekalan Air Selangor Sdn Bhd (Syabas) and Konsortium Abbas Sdn Bhd (Abbas) have agreed to deals of RM2.47 billion, RM3.11 billion and RM990 million, respectively.
Speaking at a press conference after the company's AGM and EGM here yesterday, Lin reiterated his view that the offer price should be at RM2.8 billion book value, but said that divestment of Splash would be possible at a "fair value".
"We do have it (the fair value) in my head, but I'm not going to tell you," he said when asked of the ideal pricing for Splash.
SunBiz's calculations show that the offer price for Splash should be at least RM2.55 billion based on the "no gain-no loss" basis. The amount would be a 8.93% discount of its current book value of RM2.8 billion.
The Selangor state government however is offering a fraction of this for Gamuda's stake. At RM250.6 million the offer price for Splash however, would result in a divestment loss of RM920 million for 40% stakeholder Gamuda.
The Selangor government had earlier sought the federal government's approval to push for the enforcement of the WSIA, which would see a forced sale of water assets in the state.
Despite that, Lin is confident that the government will not invoke WSIA, citing it should be done on a "willing-buyer willing-seller" basis.
"We don't want to be too regime or in a position to demand…we try to have a nice talk to resolve (the issue) in a friendly way," he said.
Lin explained that giving up about RM1.4 billion in future earnings was Gamuda's compromise, considering that there was another 16 years to go for its concession.
He also pointed out that the foreign shareholding in Gamuda has fallen from over 50% earlier to less than 30% following talk of the government invoking WSIA to resolve the deadlock.
"We would like to see that any resolution for Splash can be done in a market friendly way and (that it should not take too long, as it has been five years) already," he said.
Meanwhile, managing director of Gamuda Land Chow Chee Wah said the property division is targeting to achieve sales of RM1.8 billion for the financial year ending July 31, 2015.
Gamuda has a total land bank of 3,900 acres with a gross development value (GDV) of RM47 billion, which is sufficient for the next 15 to 20 years.
On the mass rapid transit (MRT) project, Lin said the group is spending RM20 million to RM30 million to ensure the safety of the construction sites by providing training to contractors and workers.
He expects the MRT Line 2 to get final approval by October 2015 and for work to start in 2016.
Besides MRT, Lin said the group is interested in taking the role of project delivery partner under the Penang Transport Masterplan.