Water concession rescinded in Johor

Thursday March 12, 2009
Water concession rescinded in Johor
By YVONNE TAN

KUALA LUMPUR: Pengurusan Aset Air Bhd (PAAB) has sealed its third water restructuring agreement, this time with the state of Johor which will see it take over RM4.03bil worth of water-related assets in the state. This is the first agreement involving a private concessionaire.

PAAB’s acquisitions from the state of Malacca and Negri Sembilan which were completed in December and January respectively involved takeovers from the state governments.
PAAB chief executive officer Suhaimi Kamaralzaman said: “The most crucial achievement of this deal is getting SAJ Holdings Sdn Bhd, a private concessionaire, to migrate to the new licensing regime and rescind the current concession agreement (in the state).”

“When the concession no longer exists, the scheduled tariff hike in the concession agreement will not apply anymore; hence there will be no tariff hike for Johor this year,” he said at the signing of the agreements yesterday. Suhaimi said the water assets in Johor were acquired at one time book value and was concluded on a “willing-buyer-willing-seller” basis. The handover of water assets is part of the national water services industry restructuring initiative undertaken by the Government involving Peninsular Malaysia and Labuan. Following the migration to the new regime, consumers in Johor will not need to experience a tariff hike of up to 19% this year.

Meanwhile, under the agreements signed yesterday, government-owned PAAB will take over RM4.03bil worth of water-related assets such as water treatment plants, piping networks and reservoirs in Johor belonging to SAJ Holdings, Syarikat Air Johor Sdn Bhd (a unit of Ranhill Utilities) and Johor’s state government. To pay for the assets, PAAB will assume the parties’ related liabilities totalling RM3.18bil which include RM2bil SAJ Holdings Islamic bonds and bank loan.

SAJ will continue to manage the water distribution in the state and will lease the water assets from PAAB for operations and maintenance for a period of 30 years at an annual charge of about RM240mil.

Earlier, Deputy Prime Minister Datuk Seri Najib Tun Razak who was also present at the ceremony said PAAB was expected to spend RM3.5bil in capital expenditure over the next 30 years to upgrade Johor’s water system.

On another note, Suhaimi said PAAB was looking to conclude its next deal with the state of Pahang. As for Selangor, he said PAAB was “expediting” its negotiations with Selangor’s private concessionaries.

Selangor, whose water sector is the most fragmented, is locked in a controversy where the state has made an offer to the four concessionaries involved but PAAB has initiated direct dealings with the concessionaires. A deal however, needs to be formalised by the end of the month or the concessionaires can mpose a 37% tariff hike on water in the state.