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Wednesday, April 1, 2009

> Selangor gears for water battle

Selangor is gearing up for a battle against water tariff hikes if the federal government returns water operations in the state back to concessionnaire Syarikat Bekalan Air Selangor Sdn Bhd (Syabas).

For now, the state is asking for arbitration of the matter with all parties concerned and if all else fails, it is prepared to take the matter to court.

On a report that the Cabinet will discuss today (Wed) whether a scheduled tariff hike should be allowed, Menteri Besar Tan Sri Abdul Khalid Ibrahim said there should not be any unilateral increase of tariffs.

“If the Energy, Water and Telecommunications Ministry wants to allow the tariff increase, they should meet the state through arbitration as provided for in the concession agreement,” he said, adding that discussions should include the state and Federal governments and the water concessionnaire. 

“From this, we can decide if a water tariff hike is justified.”

The scheduled tariff hike of 31% (brought down from the original 37%) was supposed to kick in on Jan 1 but was postponed to April 1 to allow the state to initiate a takeover of the water concessionnaire's equities. However, the negotiations seem to have stalemated. 

Abdul Khalid hoped the Federal government will take on the state government's suggestion to restructure the industry so that water tariffs can be brought down instead of the scheduled hikes, if the concession companies take over.

Earlier, the state had found that the concession companies failed to adhere to the terms in the contract and that it had failed to follow guidelines stipulated in the concession agreement, like conducting direct negotiations instead of via open tender.

“Syabas has also failed to keep to its end of its deal to reduce non-revenue water (NRW) in the state,” he added.

He said the state had already requested that the Federal government terminate the contract but there has been no response so far. “We are ready to initiate legal action as a last resort.”

Selangor had made an offer of RM5.71 billion to the four water concession companies Puncak Niaga Holdings Bhd, Syabas, Konsortium Abbas Sdn Bhd (Abbas) and Syarikat Pengeluar Air Sungai Selangor Sdn Bhd (Splash) to take over the water concession on Feb 13. 

However, on Feb 18, two days before the deadline for the concession companies to respond to the state’s offer, the Energy Water and Communications Ministry via Span CEO Datuk Teo Yen Hua announced that the Federal Government would negotiate directly with Selangor water concessionaires via the Finance Ministry-owned Pengurusan Aset Air Bhd (PAAB). 

PAAB offered RM6 billion to take over just the assets of the company. Under the asset light model, companies which migrate to the water licensing regime under the restructuring, need not worry about loans for assets as these will be undertaken by PAAB - the Sun.