Malaysia

Water tariff hike maximum 15pc, says Khalid Ibrahim

By Boo Su-Lyn
November 10, 2010
Latest Update: November 11, 2010 12:21 am

Khalid explained that the previously agreed rate hike structure would be akin to a compound increase for consumers. — file picKhalid explained that the previously agreed rate hike structure would be akin to a compound increase for consumers. — file pic

Earlier during the state assembly today, Khalid said that the state government was ready for a court battle to prevent Bekalan Air Selangor Sdn Bhd (Syabas) from implementing higher water tariffs in the state.

“If the price (of water) now is 57 sen, my limit of increase is 15 per cent,” Khalid told reporters today.

The Pakatan Rakyat government has so far been resolute in disallowing Syabas to revise water rates upwards as mandated in an agreement involving the state, the federal government, and the sole water distributor in 2004.

Earlier during the state assembly this morning, Khalid pointed out that Syabas did not fulfil the conditions in the agreement, citing the Auditor-General’s Report.

“If we were to continue the agreement, last year, Syabas was supposed to implement a 37 per cent water tariff hike. In 2012, it will go up by 25 per cent and in 2015, it will go up by 20 per cent... it’s a compound increase,” said Khalid in the press conference today.

“So if now, water tariff rates are 57 sen, after the agreement is implemented, it will be RM1.17. We feel that this is unnecessary. If we restructure the water concessionaires, we can reduce water tariffs and stabilise the price of water,” he added.

Khalid also lambasted the federal government for breaking its pledge, which he claimed was made before Election 2008, to allow a state-owned company to manage the restructuring of the water industry.

“Before March 2008, the federal government promised that the restructuring would be done under a company fully owned by the state government. But after March 2008, when Pakatan Rakyat (PR) took control of the state, the federal government did not want to do what it agreed in January 2008,” he said.

The Khalid administration’s decision to bar the water concessionaire from implementing a 37 per cent tariff hike in 2009 has led to problems in payment to Syabas’s treated water suppliers like Syarikat Pengeluaran Air Sungai Selangor Sdn Bhd (Splash), Puncak Niaga Sdn Bhd (PNSB) and Konsortium ABASS.

The Selangor government had claimed that Syabas had not done enough to reduce leakages which cost the state millions.

Selangor’s water players — Syabas, PNSB, Splash and Konsortium ABASS — are at risk of debt payment default as water bonds approach their December 31 maturity date.

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.

When asked how a court battle would help resolve the lengthy consolidation talks by year end, Khalid answered: “It may not help, but I want to make sure that Selangor users will not pay higher than they should be paying.”

He also claimed that the water concessionaires were “quite happy” with the state government’s bid to acquire their equity and assets.

“The water concessionaires are quite happy with the offer price we have given. But the federal government is quite reluctant for the state government to control water operations,” said Khalid.

“We are saying to the federal government now, ‘the ball is in your court’, and you can ask the water concessionaires to give their proposal on how to resolve the issue. The position of the state is simple. You can have your restructuring, but the price of water must be at this level and they must recognise the assets of the state,” he added.

The state’s water assets are parked under concessionaires PNSB and Syabas — both of which are controlled by Puncak Niaga Holdings Bhd (PNHB) — as well as Splash and Konsortium ABASS.

Konsortium ABASS is 55 per cent-controlled by Kumpulan Perangsang Selangor Bhd (KPS) while Splash is a 40 per cent-owned associate of Gamuda Bhd. The Selangor government’s investment arm, Kumpulan Darul Ehsan Bhd (KDEB), owns 30 per cent of Syabas while PNHB holds the balance 70 per cent.

After about two years of negotiations following the surprise takeover of the state by PR, no deal has materialised in Selangor despite three offers from the current state government, the latest totalling RM9.2 billion for both equity and assets.

In an interview with The Malaysian Insider recently, Minister for Energy, Green Technology and Water Datuk Seri Peter 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.

Khalid has valued the state water assets at RM10.98 billion while the federal government insists it is only worth RM1 billion.

However, Chin had warned that the Water Asset Management Company (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.

Shah Alam is now looking at arbitration to help assess the value of Selangor’s water assets to overcome the deadlock with Putrajaya, according to Klang MP Charles Santiago.