KUALA LUMPUR, Nov 6 — Shah Alam is looking at arbitration to help assess the value of Selangor’s water assets to overcome a deadlock with Putrajaya, said Klang MP Charles Santiago.
Selangor Mentri Besar Tan Sri Khalid Ibrahim has valued the state water assets at RM10.98 billion while the federal government insists it is only worth RM1 billion.
Disagreement over how much the water infrastructure is worth has crippled negotiations, with the Minister for Energy, Green Technology and Water Datuk Seri Peter Chin recently alleging that Khalid’s “unreasonable” figure appeared to be an attempt to sabotage ongoing talks.
Santiago, who is a member of the Selangor water review panel, said it might be necessary to resort to outside help because it was difficult to find a neutral local party to judge the matter.
“Everybody in Malaysia has taken sides already,” he told The Malaysian Insider.
“Therefore you need a body, maybe from outside the country, to arbitrate the process. It has to be someone from outside the country because right now it’s very cloudy.”
He said, however, that these third parties must be familiar with the water industry as they would then be able to come up with a more accurate assessment of Selangor’s water assets and explain the “huge difference” between federal and state valuations.
The Selangor government is currently considering bringing in water operators from Thailand, Indonesia or the Netherlands to help with this task, Santiago added.
He urged Chin to resolve the federal-state dispute through an “arbitration mechanism” as that was the only way to reach a fair settlement.
At the same time, the Selangor DAP vice-president defended the state government’s valuation, which he said had been arrived at with the help of former engineers with the Selangor Water Supply Department (JBAS).
“They (engineers) did the planning for Selangor and also they did the building of some of the dams and some of the plants. They have procured money for these projects... so they know the water infrastructure very intimately,” he said.
Santiago added that the “30 to 40 years” of experience JBAS engineers brought to the table were more accurate compared to consultants brought in by the Water Asset Management Company (PAAB), who looked only at the “paper value”.
Selangor’s water players — Syarikat Bekalan Air Selangor Sdn Bhd (Syabas), Puncak Niaga Sdn Bhd (PNSB), Syarikat Pengeluaran Air Sungai Selangor Sdn Bhd (Splash) and Konsortium ABASS — are at risk of debt payment default as water bonds approach their December 31 maturity date.
The looming debt service problem started when Syabas was barred from implementing a 37 per cent tariff hike agreed upon in January 2009, after the Selangor government claimed the sole water distributor had not done enough to reduce leakages which cost the state millions.
This in turn led to payment problems between Syabas and water treatment concessionaires PNSB, Splash and Konsortium ABASS, who supply it with treated water.
All four term loan borrowers are already in technical default following their inability to maintain six months’ worth of reserves in a special account used to pay bondholders. The shortfall is understood to be some RM50 million, although this deficit could double in six months.
In an interview with The Malaysian Insider earlier this week, Chin said Putrajaya might consider bailing out water bondholders via a bond swap if no headway is made soon.
He said swapping existing bonds with triple-A government-backed ones was one option on the table to buy stakeholders more time as state and federal governments try to break the current impasse.
However, Chin warned that PAAB could not raise bonds worth RM10.98 billion as that would lead to “rocketing” tariff hikes and said the wholly-owned Ministry of Finance Inc company was only willing to offer RM1.1 billion for Selangor’s water assets.