Selangor overpaying RM2b for water deal, amounts to bailout for Puncak Niaga, reveal PKR papers


(TMI) – Selangor should not cough up RM2 billion to fund the RM9.65 billion takeover of four water concessionaires as the deal amounts to a bailout of Puncak Niaga, which also owns water utility Syabas, according to an internal PKR document.

The document sighted by The Malaysian Insider is a briefing note for the party’s leadership that is now debating Selangor Menteri Besar Tan Sri Abdul Khalid Ibrahim’s haste in signing the water-restructuring pact with Putrajaya in February.

It showed that the Selangor agreement agreed to raise the payment for equity or profit for Puncak Niaga Bhd from RM1.07 billion in February 2013 to RM1.638 billion in March 2014.

“In the space of several months, the Selangor government had raised the profit compensation to Puncak Niaga (controlled by a personality close to Umno) by RM568 million,” the document revealed, referring to company founder, Tan Sri Rozali Ismail, who was a one-time Selangor Umno treasurer.

It noted that Puncak Niaga’s latest financial records for the year-ending December 31, 2012, showed the firm was in red with RM75 million, after deducting assets of RM13.4 billion and final profit of RM232.7 million from its RM13.5 billion total liabilities.

“It means that if the Puncak Niaga group was sold in the open market without any negotiations, its valuation based on its profit, assets and liabilities record would be a company without any value.

“The offer in the MoU instead gives a profit compensation up to RM1.638 billion to the Puncak Niaga group which is RM1.700 billion more than its market value based on its profit, assets and liabilities record,” said the document.

But it also said that the Selangor government had cut the compensation offered to another concessionaire, SPLASH, by RM2.1 billion with an offer of just RM251 million.

“Because of that, the bigger reduction will most likely push SPLASH to reject the offer,” said the document, adding that Selangor can then only hope Putrajaya would invoke Section 114 of the Water Services Industry Act (Wasia) to take over the water concessionaires’ assets and determine the compensation.

It pointed out that Khalid had explained the hasty signing of the memorandum of understanding (MoU) with Putrajaya on February 26 was because of two reasons although it was not ratified by the state executive council.

The reasons are that Putrajaya did not want to delay the bond payments of the water concessionaires which were held by the federal government through convertible loans.

“This will make the Puncak Niaga group bankrupt,” the document said.

The other reason was that Putrajaya wanted to speed up the Langat 2 project as its Japanese funders had threatened to pull back their loan, it added, referring to the multi-billion ringgit water-treatment plant to treat water piped from Pahang to alleviate water shortage in Selangor.