By Khairul Khalid
Water concessionaire Splash (Syarikat Pengeluar Air Selangor) denies that it has reached an agreement with the Selangor government for water restructuring.
Abdul Khalid Ibrahim
This seems to contradict Selangor Menteri Besar (MB) Abdul Khalid Ibrahim’s statement yesterday that the state takeover of water assets (including Splash) is close to being finalised, the latest by by next week.
“There has been no new communication from the Selangor government. Splash has not been informed,” Wong Mun Keong, a director of The Sweetwater Alliance, told KiniBiz today.
Splash is 40% owned by Gamuda, 30% by Kumpulan Perangsang Selangor (a unit of KDEB – Kumpulan Darul Ehsan Bhd, owned by the Selangor government) and 30% by The Sweetwater Alliance, a company controlled by businessman Wan Azmi Wan Hamzah.
Wong’s denial is at odds with the Selangor MB’s announcement yesterday. “The agreement is now at its final stage for signing. It will be signed either this weekend or next week,” Khalid reportedly said after a state executive council meeting.
Khalid had also indicated that it will finally be using WSIA (Water Services Industry Act) for a forced takeover of Splash.
Splash remains the only concessionnaire to still stall on a deal with the state. The company has been adamant that Selangor’s last takeover offer falls well short of their NAV (net asset value) of RM2.5 billion.
“RM2.5 billion is the audited NTA (net tangible assets) of Splash and hence the floor price below which shareholders will be taking a loss on investment.The most recent valuation of Splash done a few months back by an independent international valuer put the figure at RM3.8 billion using universally accepted method of DCF (discounted cash flow).
“We have demonstrated our goodwill and willingness to cooperate by forgoing all future profits and accepting the floor price of RM2.5 billion, which essentially is just the capital invested plus the trade receivables still owing to Splash for services already rendered over past few years less amounts owing by Splash to others,” Wong explained.
Splash has also indicated that they would consider legal action if they are forcibly taken over under WSIA (Water Services Industry Act) without adequate compensation.
Wan Azmi Wan Hamzah
“They (Selangor state) will almost certainly provoke a legal response if they decide to use WSIA. We won’t be appealing to the state government, just like Rozali Ismail (CEO of Puncak Niaga and Syabas) did. We shall not submit on bended knees. They will have to break us down,” said Wan Azmi to KiniBiz previously.
Section 114 of WSIA provides for the forced takeover of the water assets under circumstances of national interest.
Wan Azmi has also urged the Selangor state to expropriate Splash or take over its assets, if the situation warrants such a move, under a clause contained in the water concession agreement for state expropriation in cases of national interest.
“They (Selangor state) should expropriate us (Splash), if they feel its necessary and justified, under a clause in the concession agreement instead of hiding behind the federal government and using WSIA,” said Wan Azmi.
Despite the cabinet’s approval of WSIA, there has been reluctance by the federal government enforce it and Putrajaya has still insisted for a “willing buyer willing seller” deal between state and concessionaires.
To recap, early last April the federal government enacted WSIA after three out of the four concessionaires failed to agree on the last offer of RM9.65 billion stated in the MoU (memorandum of understanding) to resolve the longstanding water restructuring issue.
Selangor’s other water concessionaires are Konsortium Abass, Puncak Niaga and Syarikat Bekalan Air Selangor (Syabas).
Another bone of contention by Splash is Selangor’s offer to Syabas that it sees as disproportionate and unfair, given the state of Syabas’ finances and the fact that the water distribution company has been widely acknowledged to be at the crux of Selangor’s water problems over the years.
In the state’s last offer, Syabas was offered RM438 million for its equity at a negative book value of – RM1.3 billion.
Last May, Rozali seemed to concede to a RM5.6 billion state takeover of Puncak Niaga and Syabas. Puncak Niaga owns two of the four water concessions in Selangor including a 70% stake in Syabas, the sole water distributor of water in the state.
Nevertheless, shortly after Putrajaya’s approval of WSIA, Rozali appealed to Selangor to reconsider the lapsed RM9.65 billion offer. It is not clear whether the final agreement announced by the Selangor MB will revert to the original offer.
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