Water deal will face setback

PETALING JAYA: Puncak Niaga Holdings Bhd's (PNHB) intention to seek a higher price for the disposal of its two water assets to the Selangor state government is likely to cause a major setback to the water restructuring deal.
On Monday, PNHB's managing director Tan Sri Rozali Ismail, who is also the group's executive chairman, said there is a "high possibility" the water concession holder will ask for more than the RM1.56 billion offer, as the May 11 deadline for the state's water asset restructuring has passed.
"While we had expected a request for further extension (as both the Federal and state governments have not resolved
the dispute), we are surprised with Puncak's announcement that it may seek a higher price for the disposal," said AmResearch analyst Max Koh in his report yesterday.
"We opine that this may cause another setback for the restructuring exercise as it may be inconsistent with the terms stated in the master agreement," he added.
Koh said given the need to ensure sustainable water supply, both parties need to reach an amicable solution soon.
"It is imperative that the two governments resolve the water stalemate as soon as possible in order to ensure sustainable water supply in the Selangor, Kuala Lumpur, and Putrajaya.
According to water experts, Koh said, the treated water reserve margin in Selangor is now hovering at about 1% compared to the recommended 50% level. "This is further exacerbated by unscheduled water treatment plant (WTP) shutdowns caused by river pollution in Selangor," he added.
Last year, Selangor WTPs were shut down 42 times, disrupting supply for 2,838 hours. Furthermore, Sungai Sembah in Rawang was identified as an area with the most potential for pollution; it is subcatchment area for Sungai Selangor, which supplies over 60% of raw water in Selangor.
Rozali recently said inadequate water supply has put 1,038 new development projects with a demand of 850.8 millions of liters per day on hold.
" While there is no end in sight yet, we remain hopeful of a resolution," said Koh who maintained his neutral on the water sector and kept a hold recommendation on PNHB.
Koh said the completion of the water deal still hinges on the transfer of the Bukit Nenas and Semenyih water assets to Pengurusan Aset Air Bhd (PAAB).
Recall that the delay was caused by a dispute on the ownership of the two assets. According to recent reports, the dispute was caused by Energy, Green Technology and Water (KeTTHA) officials who erroneously listed the two assets as state-owned as opposed to federal-owned.
"This was the reason why the state was adamant that the two plants belong to Selangor when in actual fact both plants and land are federal-owned," Koh said.
In any case, he said, state and federal officials in a recent meeting have identified four other assets, with adequate value to replace the Semenyih and Bukit Nenas assets, to facilitate the transfer.
"But this could not be finalised yet. Recall that assets amounting to RM2 billion are required to be transferred to the Federal government before funds can be allocated to state's arm, Pengurusan Air Selangor Sdn Bhd (PASSB) for the acquisition of the concessionaires' equity," he explained.
Koh is also convinced that despite threats by the Federal government to invoke the Water Services Industry Act (WASIA) to compel Selangor to proceed with the water deal, this will still be a last resort.