Rejection by Puncak Niaga, SYABAS and SPLASH for the latest offers

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The Federal Government has failed in its promise to ensure that the water concessionaires accept the acquisition offers made by the Selangor State Government

Yesterday, March 10th is the deadline given to the privatised water concessionaires to respond and accept the renewed acquisition offers made by the Selangor State government for the purposes of consolidating the water industry in the state.

The renewed offers were made as a consequence of the Memorandum of Understanding (MOU) signed between the Federal and the Selangor Government on 25th February 2014.

Yesterday, three of these concessionaires, Puncak Niaga Sdn Bhd, Syarikat Bekalan Air Selangor (SYABAS) and Syarikat Pengeluar Air Selangor Holdings (SPLASH) made the announcement to Bursa Malaysia that they have effectively rejected the renewed offers by the state government.

While SPLASH rejected the offer outright, Puncak Niaga and its subsidiary, SYABAS said they were willing to “consider” the offer by the state subject to several unreasonable conditions. These conditions included:

(i) a higher return on equity of 15% instead of 12%,
(ii) the full payment of the disputed compensation for the non-increase in water tariff hikes by the state government
(iii) the rejection of due diligence by the state government on Puncak Niaga and SYABAS assets
(iv) the rejection of international arbitration in the event of disagreements over the appropriate return of equity.

Hence, the state of the water industry restructuring has returned to exactly square one, where only 1 company accepted the offer, that is Selangor’s own subsidiary, Kumpulan ABASS.

The Selangor state government has shown it’s goodwill and willingness to cooperate with the Federal Government to resolve the critical water crisis by signing the MOU last week witnessed by the Prime Minister Dato’ Seri Najib Razak himself.

Selangor has even agreed to immediately approve the development order for the construction of the Langat 2 water treatment plant project while all other required approvals such as land rights, access permissions and other permits shall be granted within 30 days of signing the MOU.

As highlighted above, the Federal Government has failed to cajole these concessionaires into accepting the above offer. Hence, the BN government has failed to live up to its end of the bargain. Therefore, the Selangor state government no longer needs to grant all the additional approvals required by Langat 2 for land rights, access permissions and other permits.

To ensure that the MOU remains intact, it is now up to the Federal Government to announce its commitment by announcing that it will immediately exercise all its powers under the Water Services Industry Act (WSIA), particularly using Clause 114 to compulsorily acquire these water companies based on the compensation model detailed in the concession agreements.

In the meantime, the Selangor state government via its Executive Council and the Selangor state assembly, shall exercise all its powers enshrined under the laws of Selangor and the Federal Constitution to deny any further licenses to be issued or awarded to the relevant Federal Government entities for the purposes of the Langat 2 project. Without these additional approvals, the Langat 2 project cannot proceed.

The Pakatan Rakyat administration and government will not be cheated by the Federal Government. We will not betray their trust of our Selangor voters and will fight tooth and nail with the BN Government to ensure that the interest of the Selangor residents are fully protected.