PETALING JAYA: Energy, Green Technology and Water Minister Datuk Seri Dr Maximus Ongkili expects Section 114 of the Water Services Industry Act 2006 (Wasia), which allows for the federal government to step in and take over the operations of water assets, to be invoked in two weeks.
“After we take over, the water players in Selangor will continue to carry out the operations but subject to our terms. Under Section 114, the minister takes control, and the task force will oversee the water production and assets of the company,” he told StarBiz in an interview recently to clear the air on the consolidation of the water assets in Selangor.
He explained the sequence of events that would take place in the run-up to the invocation of Section 114 of the Wasia.
“The Cabinet committee on the Selangor water issue is due to meet on Wednesday, March 26, to discuss the finer details on invoking Section 114. Following this, it will be brought to the Cabinet for endorsement and subsequently for gazetting by the Attorney-General’s chambers.”
Ongkili said the entire process was expected to be completed in two weeks.
“Once gazetted, we can take control and appoint the administrators. We will also implement the development of the Langat 2 water treatment plant,” said Ongkili.
He said the structure of the Section 114 regime allowed for the appointment of not less than three administrators to represent the three stakeholders with interest in the water assets.
Two separate task force teams will also be set up to oversee the water production and management and the assets of the concessionaries to ensure they meet repayments of their loans and bonds that has been guaranteed by PAAB.
The task force will operate and control the water treatment and distribution business in Selangor, Kuala Lumpur and Putrajaya.
Ongkili said that post-takeover, he or his appointees would become the parties responsible for the operations.
“In a sense, the minister or officers appointed by him will assume the role of chief water-production engineer whom the concessionaires will report to.
“In short, the water players in Selangor will just have new bosses. We will set the key performance indicators of their water production targets, quality control, maintenance matters and overall management, and they will be paid accordingly for the water,” Ongkili explained.
Ongkili said the invoking of Section 114 was an interim step that needed to be put in place since things were not working out between the concessionaries and the Selangor government in the restructuring of the water assets in the state.
“It will be an interim three-year takeover till the first trickle of water comes from the Langat 2 water treatment plant or shorter, depending on the situation.
“No one will be displaced. They (the players) will still own the assets, but we will monitor to ensure they service their interest payments,” he said.
The water concessionaires in Selangor are Puncak Niaga Holdings Bhd, Syarikat Bekalan Air Selangor Sdn Bhd (Syabas), Syarikat Pengeluar Air Sungai Selangor Sdn Bhd (Splash) and Konsortium ABASS Sdn Bhd.
Puncak Niaga has a 70% stake in Syabas while Splash is 40% controlled by Gamuda Bhd, with the rest of the equity evenly split between Kumpulan Perangsang Selangor Bhd (KPS) and Sweetwater Alliance Sdn Bhd.
A month ago, the federal and state governments inked a memorandum of understanding (MoU) to break the five-year-old impasse, offering the water players RM9.65bil to turn in their assets, but only Konsortium ABASS accepted the offer.
Ongkili explained why Section 114 of the Wasia had to be gazetted, although it had been passed as law in 2006.
He said that since it was the first time the Section was being invoked, the law says it must be gazetted.
Section 114 of the Wasia is crucial because it provides for step-in rights whereby the minister may, if he thinks it necessary in the name of national interest and with the prior approval of the federal government, direct Span to assume control of the operations of a licensee, and carry on or appoint others to carry on the licensee’s operations.
Ongkili listed reasons why the water situation in Selangor was grave and a matter of national interest that warranted the invocation of Section 114 of the Wasia.
He said the water reserve margin was at 1% and there were 787 water projects being kept under review due to insufficient water supply in the state, Kuala Lumpur and Putrajaya.
The stalemate has affected the completion of the Pahang-Selangor inter-state water transfer project, which cannot take off without the treatment plant in Kuala Langat.
He said the tunnel to transfer the water from Pahang was 90% complete but the Langat 2 water treatment plant did not have the required development orders, which, incidentally, had since been issued to the state pursuant to the MoU.
“The insufficient water affects the image of the state and country as an investment destination.
“It is due to these factors and the issue of the sustainability of the water supply to Selangor, Kuala Lumpur and Putrajaya that has forced us to resort to invoking Section 114,” he added.
He said post-invocation, his ministry would continue to facilitate the restructuring of the water sector that is led by the Selangor state.
“We still want to see a willing buyer-willing seller deal (being hammered out) and would like to see the concessionaries getting a fair price.
“But once the Section is invoked, there is very little room for the concessionaries, even if the state is willing to talk to them.
“The Section does not bestow us the right to take over the assets, as our role is to facilitate as per the content of the Mou,” he said.
Wasia statement timeline:
Feb 26, 2014
Energy, Green Technology and Water Minister Datuk Seri Dr Maximus Ongkili says Government hopeful the Selangor water asset takeover issue would be resolved in two weeks.
11am – Selangor Mentri Besar Tan Sri Abdul Khalid Ibrahim gets called to Putrajaya.
Three water concessionaires – Syabas, Puncak Niaga and Splash – decline the RM9.65bil offer by the Selangor state government. Konsortium ABASS accepts.
Abdul Khalid drops a bombshell by disclosing that since the Government had elected to forcibly acquire Selangor’s water assets, the price would be lower by about RM2bil from its original RM9.65bil offer.
Ongkili says federal government had not invoked Section 114 of the Wasia but was in the midst of doing so.
Ongkili says federal government fine-tuning the Wasia and it will be invoked next month.