Selangor confident MoU will expedite water industry restructuring, protect the people’s rights

On behalf of the Selangor state government, Mentri Besar (Selangor) Incorporated (MBI) would like to reiterate that the state government would not have signed the Memorandum of Understanding (MoU) on water industry restructuring with the federal government if the rakyat’s interests were not safeguarded.

The state government is confident that the MoU would enable to expedite the restructuring of Selangor’s water industry in line with the Water Services Industry Act or WSIA 2006 (Act 655) which is an essential process to ensure world-class water services at reasonable tariffs, reduce non-revenue water (NRW) that has shot up to a whopping 33per cent while continuing with the free first 20 cubic metre water programme.

It must be emphasised that the state government has always been above board in its takeover bid in particular its RM9.65 billion offer for the equity take-over of the four concessionaires. It has even offered the possibility of resorting to an international arbitration should the water concession companies involved feel that they are worth more that the offered price tag.

These facts and others, including how the state’s water special purpose vehicle (SPV) under Kumpulan Darul Ehsan Berhad (KDEB) would be financing the takeover, were revealed by Dato’ Mentri Besar, Tan Sri Abdul Khalid Ibrahim in various press statements, media interviews and briefings to state officials and elected representatives including state assemblymen and parliamentarians. It is also not a secret that the state would allow development of Langat 2 with specified terms and conditions if it is included as part of the restructuring exercise.

The state government has remained consistent with the above facts, and strictly nothing has  changed even after the state government signed the MoU on 26 February 2014. In addition, the state government will receive RM2 billion from the federal agency, Pengurusan Aset Air Berhad (PAAB) to assist the equity takeover. On top of that, the federal government allocated another RM900 million for the state to carry out mitigation plans to ensure undisrupted treated water supply in Selangor, Kuala Lumpur and Putrajaya.

Moreover, a clause in the MoU also guarantees the rights of any party to take any action deemed appropriate and necessary as enshrined in the Federal Constitution and any relevant laws should their interests are in jeopardy. This clause clearly precludes any element of prejudice, bias or injustice in the MoU.

The concern over the possibility that the international arbitration would result in a bigger tab for the state government is unwarranted and misguided as the state took into consideration all possible scenarios with their associated risks leaving no stone unturned when it agreed to sign the MoU. The state government has always been confident that its equity valuation – a return of 12per cent per annum – can withstand international scrutiny. Until recently, this confidence has never been questioned.

Although the signing ceremony of the MoU, hosted by the Prime Minister’s Office, was done in anexpeditious manner, all the terms and conditions of the MoU were meticulously and thoroughly examined while carefully considering their balance of probabilities.  After all, the negotiations and discussions started as early as in 2010.

The reasons why it took us more than one month to reach a definitive agreement with the federal government since a letter was sent to the Ministry of Energy, Green Technology and Water on 8 January 2014 allowing the federal government to invoke WSIA 2006 in particular the Section 114 in order to ensure the completion of Selangor’s water industry consolidation are multifold. Among them are the delay in securing the commitment from PAAB to recognise the method the state government applies to evaluate Selangor’s water assets and to dispense additional federal funding  as well as the federal government’s affirmation to include state representatives in the entire Langat 2 development process.  It is worth noting that it took a lot of determination, tenacity, persistence and perseverance for all these to be specified and agreed upon in the MoU.

As the state body which has been tasked to oversee and guide all state government-linked companies (GLCs), subsidiaries and associate companies, MBI will certainly monitor the restructuring exercise closely to ensure that the interests of Selangor and its people are protected at all times. Being the state government’s wholly-owned body, MBI is of the view that we must act not only professionally but also with courtesy.

Faekah Husin
Chief Executive Officer
Mentri Besar (Selangor) Incorporated