Selangor RM2.4bn offer to Splash ‘betrays rakyat’

Abdul Khalid Ibrahim, via email to FMT

The state government of Selangor between 2008 and 2014 had never offered RM2.94 billion to water concessionaire Syarikat Pengeluar Air Selangor for an equity take-over as alleged by the Menteri Besar Selangor yesterday.

The allegation made by the Selangor Menteri Besar, as reported by SelangorKini and Free Malaysia Today (“Khalid tawar RM2.9 bilion pada SPLASH, kata Azmin”, Nov 4) is untrue, misleading and an obvious attempt to divert discussion on the current state administration’s decision to pay Splash for an equity compensation a total of RM2.7 billion – which is more than 10 times higher than the proposed RM250.6 million as in the final offer.

I would like to clarify that while I was the Menteri Besar, the state through its subsidiary Kumpulan Darul Ehsan Berhad made a number of proposals to all four concessionaires with total offer amount as listed below:

1) RM.5709 billion on 13 Feb 2009 in an assets-and-equity takeover

2) RM9.218 billion on 25 June 2009 in an assets-and-equity takeover

3) RM9.227 billion on 6 Jan 2011 in an assets-and-liabilities takeover

4) RM9.6516 billion on 20 Feb 2013, 21 Nov 2013, 26 Feb 2014, 1 Aug 2014, 12 Sept 2014. This amount involves 2 parts: RM1.978 billion for equity compensation based on non-compounded Return on Equity of 12% per annum with deductions of any historical dividend payout; RM7.6749 billion for liabilities to be assumed.

As stated above, the valuation method used in each of the first 3 groups of offerings was slightly different among themselves and that was why valuations for concessionaires vary under different groups.

In the last group of offers, we had included the element of non-compounded ROE of 12% p.a. with deductions of any historical dividends because we felt that this is a fair deal as that clause was prescribed in the concession/privatisation agreement signed by all concessionaires including Splash.

In any circumstances, we would have never considered paying Splash RM2.9 billion for equity alone as claimed by the current Menteri Besar. While we used various valuation methods, the valuation for equity was not much different. In our final offer, we arrived at RM250.6 million for equity compensation while assuming its RM1.584 billion liabilities as the fair value for Splash.

Splash had claimed injustice of the offer for equity takeover based on the stated non-compounded 12% ROE p.a. with deductions of any historical dividends. The truth is, Splash has paid out a total of RM725.4 million in dividends while Syabas had paid none to its shareholders which was why the payment for equity compensation between the two differs greatly.

As for the allegation that I had hidden the non-existent RM2.9billion offer to Splash from Dewan Negeri Selangor, I would like to point out that there was no reason for me to hide offers made by the state. All decisions are presented before the EXCO and Dewan Negeri Selangor whenever possible and necessary.

Furthermore, as the water restructuring deal involved several public listed companies, it would have been impossible not to disclose to Bursa Malaysia and other relevant authorities any details that could have a material impact on these PLCs.

In addition, my office held numerous press conferences whenever we had any breakthrough on the water restructuring matter and issued hundreds of press statements. We also hosted various briefings for ADUNs and MPs who had also participated in state-wide roadshow to raise public awareness on the water issue. We were also very meticulous in our presentation to Dewan Negeri Selangor and I am confident that the hardworking government officers especially UPEN can vouch for that.

It is very unfortunate that the current administration chose to discard these good practices and as a result, we found out today that the state executive councillors’ meeting had decided to pay RM2.7 billion to Splash as confirmed by state EXCO member, YB Zaidy Abdul Talib who had also indicated the sum was rejected by the Ministry of Energy, Green Technology and Water.

I would like to reiterate that the whole takeover sum cannot be more than RM9.65 billion as it will affect future water tariffs and efforts to bring down non-revenue water in Selangor. The fact that the state is seriously considering paying Splash an extra RM2.45 billion is an act of betrayal to the rakyat’s trust.

Tan Sri Abdul Khalid bin Ibrahim was menteri besar of Selangor from 2008-2014.