Selangor water deal ‘binding and irrevocable’, MoU states

(MM) – Selangor appears to be getting the short end of the stick in its water agreement with Putrajaya as the construction of the long-opposed Langat 2 treatment plant is deemed “binding and irrevocable”, while the valuation of water assets is subject to negotiation.

The contentious memorandum of understanding (MoU), which was obtained by The Malay Mail Online yesterday, also did not specify exactly how the federal government will provide the RM2 billion allocation to aid the Pakatan Rakyat (PR) state government in acquiring water utilities in Selangor.

“In exchange and in order to implement the agreement on the sale and purchase of raw water between the Pahang state government and the Selangor state government, the Selangor state government must… ensure that all relevant approvals (whether they have already been identified, or will emerge) in relation to the LRAL2 from the Selangor state government or the relevant authorities are binding and irrevocable, and are in effect in any condition whatsoever and cannot be retracted, cancelled, hung, or amended, unless the federal government makes such a request,” the MoU states, referring to the Langat 2 water treatment facility and its distribution system as LRAL2.

The agreement also states that Selangor is to ensure that all necessary approvals for Langat 2, including land use and the permit for the use of forest reserve land, will be given within 30 days from the date of the MoU.

The MoU was signed by Selangor Mentri Besar Tan Sri Khalid Ibrahim and Green Technology Minister Datuk Seri Dr Maximus Ongkili on Wednesday at a hastily-convened event in Putrajaya.

Under the MoU, Selangor will take over the operations of four water concessionaires — Syarikat Bekalan Air Selangor Bhd (Syabas), Puncak Niaga Sdn Bhd (PNSB), Konsortium Abbas Sdn Bhd and Syarikat Pengeluar Air Selangor Holdings Bhd (Splash) — for RM9.65 billion, and will place these under the state-owned Kumpulan Darul Ehsan Sdn Bhd (KDEB).

The agreement states that the water management companies have until March 10, 2014, to accept KDEB’s offer.

The RM9.65 billion price tag includes the water concessionaires’ loans and bonds that were estimated at RM7.68 billion as of December 31, 2012, as well as equities, together with a return of 12 per cent a year, that equalled to RM1.972 billion as of the same date.

In exchange for Putrajaya’s RM2 billion aid to Selangor, through Pengurusan Aset Air Berhad (PAAB), the state government is to sell water assets or equity in KDEB’s water special purpose vehicle (SPV) to PAAB for RM2 billion, where the federal government can have a stake of up to 30 per cent.

PAAB will also take over the water concessionaires’ loans and bonds amounting to RM7.68 billion as payment for the water assets, or equity in KDEB’s water SPV of up to 30 per cent.

“Whatever issues that may come up in determining the value of the assets under paragraph iii and iv, which are not agreed upon between the Selangor state government, KDEB and PAAB, must be referred to an independent mediator that will be jointly determined by all parties,” states the MoU.

According to the document, Putrajaya is undertaking mitigation projects at RM909 million to resolve water supply problems in Selangor, Kuala Lumpur and Putrajaya until the Langat 2 plant is in operation.

PKR deputy president Azmin Ali has criticised the agreement, noting that the Selangor government had previously said that Langat 2 is unnecessary as long as Syabas reduces non-revenue water to 20 per cent by this year, and as long as the margin of treated water is at least 12 per cent.

Water supply in Selangor has been a contentious issue since the state fell to PR in Election 2008, with residents experiencing repeated supply outages that the state administration alleged were due to sabotage by the rival Barisan Nasional coalition.

Water disruptions are set to hit 2.2 million consumers in the Klang Valley once the on-going water rationing during the unusually long dry spell is expanded this Sunday, Syabas said yesterday.