Selangor water saga — will it ever come to an end?

Unscheduled water supply cuts happen so frequently in the state that it has become commonplace


FOR most people, a decade is just too long a time to get one job done. In the case of ending the water woes of some 6.4 million people in Selangor, however, 10 years seem to be just the beginning.

Despite being the most advanced state in the country in terms of infrastructure and human capital, Selangor still suffers from a third-world problem of frequent water supply outages, leaving residents and businesses with dry taps.

In 2015, statistics from the Malaysian Water Association showed that nearly half of water supply disruption incidents in the country were from Selangor, with 83,729 cases reported.

Unscheduled water supply cuts happen so frequently in the state that it has become commonplace to see droves of people queuing up with pails of all sorts every other month over the last few years.

The state administration and the federal government are not oblivious to the problem. Both sides have vowed to set their differences apart to resolve the matter, but theatrics on the field tell a separate story.

Rainy Days, Dry Pipes

It can come off as a mind trick when you see heavy rain pouring out the window, yet you have no running water at home.

The reality is, that water needs to be treated.

The problem in water supply disruption in Selangor is not the shortage of raw water, but the constraint in treating raw water.

Currently, the state has 34 water treatment plants, which have a clean water supply capacity of 5,000 million litres per day. Demand for clean water supply is 4,900 million litres a day.

This translates into a neck and neck situation of having water reserve margin at only 2%-3% when the safe level should be at about 20%.

To widen its thin margin, the state is banking on the construction of the Langat 2 water treatment plant.

The water treatment and distribution facility, which is part of the Pahang-Selangor Raw Water Transfer project, will supply an additional 2,260 million litres of treated water per day.

However, the plant will only be completed in December 2019.

Apart from adequate water supply, disruptions are also due to under-maintenance of the water pipes network.

It was reported that 98% of water disruptions recorded in 2015 were unscheduled or due to emergencies.

Additionally, over 30% of the water supply in Selangor was lost or leaked from the water pipes network between the supply side and the consumer end.

To address the situation on the ground, the state administration had come up with a water restructuring plan to consolidate four of the country’s water concessionaires.

The companies are Puncak Niaga Holdings Bhd, Konsortium Abbas Sdn Bhd, Syarikat Bekalan Air Selangor Sdn Bhd (Syabas) and Syarikat Pengeluar Air Selangor Holdings Bhd (Splash).

However, the exercise comes at a costly price for Selangor. Financial support from the federal government is needed to ensure the transfer of assets can be fulfilled.

The Master Agreement

In 2014, the Selangor and federal governments signed a long-drawn out master agreement to finalise the restructuring plan of the state’s water supply industry.

As part of the signed agreement, some RM2 billion in cash was released by federal-owned Pengurusan Aset Air Bhd (PAAB) to the Selangor state’s Pengurusan Air Selangor Sdn Bhd to finance the acquisition of the four water concessionaire companies.

In return, the state government will transfer an equivalent worth of assets to PAAB, which will subsequently be leased back to the state’s water service provider.

The takeover of Puncak Niaga, Konsortium Abbas and Syabas had been carried out for a combined offer of RM6.59 billion.

On the other hand, Splash turned down the state’s offer on grounds that it was not a fair price, as the company had the longest remaining tenure.

Conglomerate Gamuda Bhd owns a 40% stake in Splash. Other shareholders in the water concessionaire company are Kumpulan Perangsang Selangor Bhd with 30% and businessman Tan Sri Wan Azmi Wan Hamzah’s Sweetwater Alliance Sdn Bhd, with a 30% stake.

The Selangor state government had offered a total of RM250.6 million to buy out Gamuda’s stake in Splash, but the offer was declined by Gamuda as it would result in a divestment loss of RM920 million.

To ensure that the deal concludes on a “willing-buyer willing-seller” basis, the federal government decided to conduct an independent valuation exercise to determine the value of Splash’s assets.

The independent valuation deadline ends on Oct 5.

A Waiting Game

Speaking to The Malaysian Reserve recently, Mentri Besar (MB) Datuk Seri Mohamed Azmin Ali said the ball is now on the other side of the park, as the valuation report made by appointed auditor Deloitte Malaysia has been submitted to the federal government.

Mohamed Azmin said the Energy, Green Technology and Water Ministry wrote to his administration earlier to inform that the report had been tabled to the Cabinet in May.

Subsequently, the ministry is said to have asked the Selangor state government to determine the consideration for Splash.

“Now, we are waiting. How can they ask us to decide on the consideration when the payment will be made by the federal government, not by the state, and they have done the valuation. Why are they hiding the report?

“We want to conclude as soon as possible but of course, the extension is until Oct 5. It is up to the federal government now, not the state,” the MB said.

Mohamed Azmin also said that the government had changed the payment formula, in which the state now has to back 40% of the total consideration.

“We never agreed to that because under the master agreement, the consideration must be paid by PAAB, the federal government. That is the mechanism,” he said.

None of the parties involved would admit of deploying any delay tactics, but as the extension deadline looms in, one can only expect more deferments.