Selangor government takes over water firm

A coffee-shop worker in Subang Jaya in Selangor storing water in containers during a water-rationing exercise. The Malaysian state's treated water reserves have been close to zero since 2015, which means taps run dry during droughts.
A coffee-shop worker in Subang Jaya in Selangor storing water in containers during a water-rationing exercise. The Malaysian state's treated water reserves have been close to zero since 2015, which means taps run dry during droughts.ST FILE PHOTO

$854m deal after drawn-out talks set to solve water woes plaguing Klang Valley for years

Malaysia's richest state Selangor announced yesterday it will take over water firm Splash for RM2.55 billion (S$854 million), removing the final hurdle for solving water woes that have for years plagued millions of households in the Klang Valley.

Splash is the last of four companies to sell their water assets - treatment plants, reservoirs and pipes - to the Selangor government, after drawn-out talks that the Pakatan Harapan (PH) state administration claims were deliberately stalled by the then Barisan Nasional central government.

The protracted talks were among the chief causes of dry taps for seven million people who live in the Klang Valley, which encompasses Kuala Lumpur and administrative capital Putrajaya.

"We failed previously because there wasn't close cooperation between the federal and state government. After nearly 10 years... we have found a solution today. This moment is the result of a year's negotiation," Selangor Menteri Besar Amirudin Shari said at a press conference yesterday.

Splash has, in principle, accepted the offer - which was first reported by The Straits Times last week - pending approval by its directors and shareholders. It will receive RM1.9 billion upfront. Official sources said that RM1.9 billion will be paid by the federal government, and state-owned water operator Air Selangor will pay the remaining RM650 million over nine years.

"This takeover will not involve any financial allocation from Selangor funds and the long-term payment will allow Air Selangor to operate at a reasonable cost to ensure a tariff that will not burden the public," said Mr Amirudin, referring to the nine-year timeframe.

However, the chief minister said he could not reveal the amount contributed by Putrajaya pending "certain approvals to be declared by the federal government".

With PH helming both the Selangor government and the federal government since the general election in May, the deal was hammered out within a fortnight of Dr Xavier Jayakumar - vice-president of Parti Keadilan Rakyat, part of the PH coalition - being appointed Water, Land and Natural Resources Minister last month.

The water deal is also politically well-timed, coming just a day before ballots open for a by-election in Selangor constituency Sungai Kandis.

Splash has a net book value of RM3.54 billion, which means the deal was struck at a 28 per cent discount. The firm is also forgoing RM4.7 billion in outstanding payments for treated water that were due from the state.

The company is owned by Selangor-controlled Kumpulan Perangsang Selangor, with a 30 per cent share; conglomerate Gamuda - whose largest stakeholders are state-controlled savings funds - with a 40 per cent share; and private company Sweet Water Alliance, with a 30 per cent share.

Sweet Water is controlled by businessman Wan Azmi Wan Hamzah, a protege of Tun Daim Zainuddin, who chairs the Council of Eminent Persons, the government's powerful advisory body .

Tan Sri Wan Azmi, who is also Splash chairman, said: "It is well short of what we set out to do largely because of this final discount that we had to concede. But... it is a concession that we do not begrudge too much. This is the time when everybody, including the corporate sector, has been called to put their shoulders to rebuilding the nation."

Selangor's treated water reserves have been close to zero since 2015, meaning outages occur whenever there are droughts, scheduled repairs or unforeseen damage to pipes, treatment plants or reservoirs.

Dr Xavier has said Selangor's water capacity will rise once the Langat 2 plant, owned by the federal government, begins supplying treated water in November.

A version of this article appeared in the print edition of The Straits Times on August 04, 2018, with the headline 'Selangor govt takes over water firm'. Print Edition | Subscribe