The Malaysian Reserve

Ranhill Subsidiary Bags Johor Water Concession Renewal; Group Bullish on Overseas Expansion

SAJ Ranhill Sdn Bhd (SAJ), a subsidiary of Ranhill Holdings Berhad, has renewed its licence as the exclusive water services operator for the State of Johor for a three-year period commencing 1 January 2018 to 31 December 2020.

The renewal was recommended by the Suruhanjaya Perkhidmatan Air Negara (SPAN) and approved by the Ministry of Energy, Green Technology and Water. The approval was granted following a rigorous performance review, in compliance with Section 17 of the Water Service Industry Act 2006 and Section 7 of the Water Service Industry (Licensing) Regulation 2007.

As SAJ accounts for approximately 77% of Ranhill’s total revenue, the renewal is expected to contribute to SAJ as well as the Group’s short- and long-term growth. SAJ has been the sole provider of water supply services to the second most populous state in Malaysia since 1999, initially under a 30-year Build-Operate-Transfer (BOT) concession.  In 2009, in line with the Government’s aspiration to promote policy objectives for water supply services through the establishment of a licensing and regulatory framework, SAJ voluntarily surrendered its concession and migrated to the new licensing regime.

As a total solutions provider to address every requirement, SAJ is the first private entity in the country to implement a holistic approach to water privatisation. This ‘source-to-tap’ concept entails the complete cycle of water services from the sourcing and treatment of raw water to supplying potable water to consumers, as well as bill collection. 

Tan Sri Hamdan Mohamad, President and Chief Executive of Ranhill Holdings Berhad, said, “We are heartened by the continued trust of the Government and the regulatory authorities. The renewal of our operation licence for another three years is testament to the high level of service that the Group has delivered over the years. Since the migration to a licensing regime, SAJ has demonstrated consistency and reliability in fulfilling the KPIs set by SPAN. Moreover, SAJ is in full compliance with meeting the KPI to reduce water loss or Non-Revenue Water (NRW) in Johor with the lowest NRW per kilometre of pipe in Malaysia.”

SAJ operates and maintains a combined production capacity of 1,986 million litre per day (mld). It has reduced the state’s NRW which stood at over 40% in 1999 to 24.7% at end June 2017, with physical loss of only 15.4 m3 per kilometre of pipe per day. SAJ’s operation cost of RM498,312 per 1,000 account up to November 2017 is well within the KPI target set by SPAN.

Tan Sri Hamdan added, “This renewal certainly bodes well for Ranhill, as SAJ remains a key source of revenue for the Group. Since we commenced operations nearly twenty years ago, SAJ has grown from strength to strength despite early challenges, and we take pride in our ability to meet the stringent KPI requirements by SPAN. Having invested over RM1.6 billion in SAJ during the early years, the Group is committed to continue growing and strengthening our presence to supply water services in Johor.”

“Moving forward, we expect to see rapid and sustained growth in Johor on the back of an annual increase in water consumption by 3.7% from new housing developments, rapid industrialisation and increased commercial activities. The Group is wholly confident that SAJ will continue to deliver a strong performance in the years to come,” Tan Sri Hamdan said.

For the quarter ended 30 September 2017, the Group recorded a revenue of RM383.5 million (Q3 2016: RM370.8 million) and profit before tax of RM47.3 million (Q3 2016: RM46.7 million). For the same quarter, Ranhill also registered an improved net profit of RM25.2 million, a 78.7% rise from RM14.1 million in the previous year. Profit after tax grew to RM34.2 million, a 23.5% increase from RM27.7 million last year.

For the first nine months, revenue and profit before tax amounted to RM1,103.5 million (2016: RM1,072.6 million) and RM142.2 million (2016: RM139.3 million) respectively. Ranhill paid out a total dividend of 7.8 sen per share for the year ended 31 December 2016, and has a target of long-term payout ratio between 50% and 70% of the Group’s profit attributable to equity holders for the year. In line with this commitment, the Group made a first interim dividend payment of 1.0 sen per share on 13 December 2017 and expects to meet its long-term payout ratio for the financial year ending 31 December 2017.

Water and industrial wastewater treatment continues to be a core engine of growth for the Ranhill Group, with concessions in Malaysia, China and Thailand bringing in a steady revenue stream. The Group has a total of 17 water and wastewater concessions on BOT, Takeover-Operate-Transfer (TOT) and Built-Transfer-Operate (BTO) basis with an aggregate treatment capacity of 290 mld and 102mld in China (40% owned subsidiary) and Thailand (100% owned subsidiary) respectively.

In China, existing key wastewater treatment concessions have been identified for expansion, including the Xiaolan plant (from 80 mld to 150 mld), Yihuan plant (from 5 mld to 15 mld), and Wanzai plant (from 5 mld to 12.5 mld). Meanwhile, the Chongren and Yong Xin wastewater treatment plants have been earmarked for further upgrades to meet strict regulator standards. New projects in the pipeline also look to be progressing well, including the 10 mld Yong Feng wastewater treatment plant scheduled for completion in mid-2018, as well as ongoing negotiations to secure a new wastewater treatment concession in Fenxin for a 20 mld plant.

Ranhill’s expansion plans in Thailand saw the Group recently secure a 7 mld water reclamation plant in October 2017, which will be implemented on a BOT scheme in Thailand. This, on top of further upgrades to its existing 10 mld wastewater treatment plant within Amata City Industrial Park planned for mid-2018, will increase the Group’s total treatment capacity to 114 mld. Local Directors have also been appointed to helm the Group’s Thailand subsidiaries, which is expected to enable Ranhill to further expand its footprint.

Leveraging the Group’s wealth of experience, Ranhill is looking to extend its reach not only within Thailand but also in the surrounding Indo-Chinese nations.

“In addition to our local operations, we are equally focused on growing our international operations. With these expansion plans in place and on track, the Group strongly believes that we are well-positioned to achieve further growth around the region,” concluded Tan Sri Hamdan.