The restructuring of the water industry in several states in Peninsular Malaysia is still meandering. Years after Pengurusan Aset Air Bhd (PAAB) began negotiating with the various state governments to take over the water infrastructure, there are no deals yet in five states.
Selangor is the most high-profile example, with the deadlock over the issue threatening to escalate into a water crisis. But there has also been slow progress with Kelantan, Kedah, Terengganu and Pahang.
Industry sources said the water asset management company was “still in talks” with Kelantan and Kedah on the acquisition of both states’ water-related assets. The sources added that nothing was moving at the moment.
Kelantan is said to have sought the Penang Government’s advice as the latter had transferred its water assets to PAAB last year. Nevertheless, there is no indication that PAAB and Kelantan are close to signing anything.
The sources also said Terengganu was in no hurry to transfer its water assets to PAAB, while Pahang had to resolve some issues with the Federal Government before selling its water assets to PAAB.
PAAB has been entrusted with the restructuring and consolidation of the country’s fragmented water sector by taking over the assets and making state concessionaires asset-light, thus allowing them to focus on treatment and distribution.
In December 2008, PAAB sealed its first two acquisition deals with Malacca and Negri Sembilan.
The restructuring of the water sector in Penang is considered a milestone because the state is opposition-controlled, as are Kelantan and Kedah.
The Penang Government had in June 2011 transferred RM655.2mil worth of water-related assets to PAAB in exchange for a complete restructuring of the outstanding loans owed by the state. PAAB will lease back the water assets to Perbadanan Bekalan Air Pulau Pinang for 45 years. The latter will pay an annual lease rental of RM14.56mil and, upon settlement of the lease at the end of 45 years, the state land will automatically revert to the state.
In May this year, the Perak Water Board had inked an agreement with PAAB which will see RM999.2mil worth of state water assets transferred to the latter.
Currently, six of 11 states in the peninsula Johor, Malacca, Negri Sembilan, Perlis, Penang and Perak have restructured their water services industry.
With the acquisition of their water assets, PAAB has RM9.24bil worth of water assets in its books. It is targeting to conclude restructuring deals with the other states by end-2013.
