In the Edge Financial Daily:
- Syabas may get tariff hike
Written by Jose Barrock
Tuesday, 28 September 2010 12:12
KUALA LUMPUR: A water tariff hike of between 15% and 20% may be in the offing for Syarikat Bekalan Air Selangor Sdn Bhd (Syabas), sources said.
The increment would be a lifesaver for the water treatment players, Syarikat Pengeluar Air Sungai Selangor Holdings Bhd (Splash) and Konsortium Abass Sdn Bhd, which are both on the verge of defaulting on their debt commitments.
Syabas has not paid the water treatment players, which supply the treated water, because the tariff hike that was scheduled to kick in early last year did not materialise.
It is understood that the federal government has agreed in principle to the tariff hike for Syabas, but has yet to get the green light from the Selangor state government which is run by the opposition Pakatan Rakyat.
Syabas has the mandate to supply treated water to Kuala Lumpur, Selangor and the federal capital of Putrajaya and under its concession agreement was supposed to get a 37% tariff hike last year.
“The federal government has more or less agreed, it’s up to the state now. The situation is critical as the water players, the water treatment plant operators are in jeopardy,” a source told The Edge Financial Daily.
It is not clear how Selangor will react to the new tariff hike as it had opposed the implementation of the 37% hike and attempted to terminate Syabas’ concession on the grounds that Syabas had not lived up to the main tenets of its concession, such as reducing the level of non-revenue water to 28% in 2008.
However, the state may be agreeable to the lower tariff hike this time considering the adverse impact that the delay has had on the industry.
Both Splash and Konsortium Abass are seeking legal redress against Syabas.
Konsortium Abass is at loggerheads with Syabas, and sent an originating summons dated Oct 5, 2009 for about RM63 million for payment of electricity cost and purchase of water invoices, among others.
Meanwhile, Splash initiated legal proceedings against Syabas in November last year, pressing for the payment of RM196 million for unpaid invoices from as far back as December 2008 to August 2009.
As the water operators have not been receiving their payments, both Malaysian Rating Corp Bhd and RAM Ratings have downgraded all their debt papers.
According to insiders, total bonds issued by the Selangor water players are in excess of RM6 billion.
The federal government has been giving Syabas soft loans to help it sustain its operations. Industry players say the company utilised the loans to pay 50%-60% of its overdue payments to the water treatment companies.
Under the current structure, water companies borrow short to finance long-term projects, which brings about the need for tariff increases every now and then.
A thorn in the side of the industry and both the state and federal governments, has been the issue of the water players defaulting on their bonds.
The other water treatment player in Selangor is Puncak Niaga (M) Sdn Bhd (PNSB). PNSB is wholly owned by Puncak Niaga Holdings Bhd. Puncak Niaga also has 70% equity interest in Syabas, which explains why PNSB is not seeking legal redress against Syabas.
Puncak Niaga is 41.25% owned by businessman Tan Sri Rozali Ismail, who is said to be closely linked to Umno. The Barisan Nasional controlled Selangor prior to Pakatan Rakyat coming to power.
The share price of Puncak Niaga was up five sen to RM2.85 yesterday.
Konsortium Abass, meanwhile, is 55%-owned by Kumpulan Perangsang Selangor Bhd (KPS) and 45% by Operasi Murni Sdn Bhd.
Splash’s shareholders are Gamuda Bhd, which has 40% equity interest, KPS (30%) and businessman Tan Sri Wan Azmi Wan Hamzah’s The Sweet Water Alliance Sdn Bhd (30%). KPS is a 60% unit of Selangor’s investment arm Kumpulan Darul Ehsan Bhd and has 30% equity interest in Syabas.
Konsortium Abass manages the Sungai Semenyih Water Supply Scheme implemented by the Selangor government and supplies treated water to Syabas to distribute to southwest Kuala Lumpur, Petaling Jaya, Shah Alam, Klang, Putrajaya, Cyberjaya, Sepang, Puchong, Seri Kembangan, Bandar Baru Bangi, Kuala Langat and surrounding areas.
The latest deadline for the consolidation of the water industry in Selangor is slated for year-end after several postponements, but most water players are not optimistic that such a consolidation can be concluded so soon due to the political factors.
This article appeared in The Edge Financial Daily, September 28, 2010.
Makes you wonder how this very reporter and his source.
Puncak the stock, of course, rose.
The stock soared 14 sen yesterday!
And today, theSun, publishes: Khalid: No water tariff hike
- ... Speaking to reporters after the state executive council meeting today, Mentri Besar Tan Sri Abdul Khalid Ibrahim pointed out that the negotiations have stalled as there are parties that do not make the interest of the people their priority.
"In fact there are concessionaires that are demanding for returns as high as 70% each year for the acquisition process," he said.
"Selangor will not allow the concessionaires to incur losses as a result of the acquisition, but we will not entertain exorbitant and greedy demands because it is the people who will have to pay for these demands," he added.
On Tuesday, The Edge Financial Daily reported that the federal government had agreed in principal on a 15% to 20% water tariff hike for Syabas, but the company needed the green light from the state government.
Khalid said although the federal government has agreed to allow the hike, Selangor refused to do so until restructuring negotiations are wrapped up.
"As per the agreement signed between Syabas, the federal government and the state government, water tariff hikes must have the approval of the federal and state governments," he said.
"The state government will not change its stand despite Syabas’ claim that it is incurring losses because it cannot increase the rates."
He said the state government intended to protect the interest of the five million consumers in Selangor, Kuala Lumpur and Putrajaya; the people of Selangor therefore need not be worried about reports of a water tariff hike.
"The state has always been committed towards concluding the Selangor water industry restructuring negotiations, keeping in mind benefits for the consumers, and towards a more efficient water services management with fair pricing," said Khalid.
Selangor has maintained that a review of water tariffs can only be done after the water industry restructuring exercise is completed.
"Only a wholesome solution can ensure that the water industry is managed in a effective manner with reasonable tariffs that will not burden the people," said Khalid.
Well... NO water hike!
And Puncak the stock is now vomiting back the gains (it's now down 10 sen) it made from that Edge Financial Daily article.
How?
Reporter publishes an article based on un-named sources.Stock flies.
The article is denied.
Stock falls.
And it happens over and over and over again.
Where's the credibility of our financial news? Yeah and what about the credible information? Credible article of facts based on unknown source?
ps: don't you think it's high time the reporter is hauled up and questioned about his source?
I still remember so much that article on the Sun: Credible information vs speculation.
Don't you want to read financial news based on credible information?
