Selangor cannot terminate Splash’s contract, says Azmin

Any suggestion to invoke Section 114 of WSIA falls under the federal govt’s jurisdiction, says MB

By AFIQ AZIZ / Pic By TMR File

The Selangor government is not in the position to terminate Syarikat Pengeluar Air Selangor Holdings Bhd’s (Splash) contract, as the concession was awarded by the federal government.

Mentri Besar (MB) Datuk Seri Mohamed Azmin Ali reiterated that any suggestion to invoke Section 114 of the Water Services Industry Act 2006 (WSIA) — which allows the state government to nullify the concession and instruct the company to hand over its assets — falls under the federal government’s jurisdiction.

“However, until today the federal government is still taking the stance of the ‘willing-seller and willingbuyer’ approach.

As such, we cannot act unilaterally as the decision must be agreed by all parties — the state, federal government and the concession company,” he told The Malaysian Reserve (TMR) after his talks in Ampang on Sunday.

“Which parts (of the Act) fall under our jurisdiction to invoke this section to allow us to nullify the contract and take over Splash’s assets?” he asked.

Mohamed Azmin was asked on the possibility of the state government to terminate the water concession agreement, should they fail to uphold the agreed terms.

Last month, TMR reported that Association of Water and Energy Research Malaysia president S Piarapakaran said the Selangor government could seek to review the terms underlying the water concession deal, including the possibility to invoke the contract if any breach of terms was found.

Piarapakaran was responding to the water disruption issue faced by millions of citizens in the Klang Valley due to maintenance work and a pipe burst incident at Splash’s Sungai Selangor Phase 3 (SSP3) Bukit Badong water treatment plant last month.

The disruption of the plant, which could produce 1,050 litres per day, had affected up to 427 areas in the Klang Valley.

Splash was appointed by the Selangor government to develop the SSP3 on a build, operate and transfer basis.

The company sold the treated water to Syarikat Bekalan Air Selangor Sdn Bhd (Syabas) — the subsidiary of Pengurusan Air Selangor Sdn Bhd — which subsequently distributes it to consumers.

In the Selangor water restructuring plan, the state is supposed to take over all concession companies including Splash, Syabas, Puncak Niaga Holdings Bhd and Konsortium Abbas Sdn Bhd in order to consolidate those companies under one centralised administration.

The federal government — through Pengurusan Aset Air Bhd — had agreed to channel RM2 billion in the exercise which helped the state take over Puncak Niaga, Konsortium Abbas and Syabas, with a combined deal of RM6.59 billion.

On the contrary, Splash turned down the state offer of RM250.6 million — stating that the offer price was too low and the company had the longest remaining tenure — which would cost them up to a RM1 billion loss.

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

The state government said they have shared the valuation outcome with the federal government and requested the same disclosure from the other side.

However, the federal government declined the request and asked the state to pay 40% of the valuation it conducted.

Mohamed Azmin, however, declined to respond to the request, as he said it breaches the original agreement between the two.

He said the federal government had agreed to finance the whole takeover exercise.

Furthermore, he added that it is not a transparent process when the state was not provided the valuation result conducted by the federal government. The independent valuation deadline ended in October last year.

Last November, the Energy, Green Technology and Water (KeTTHA) Minister Datuk Seri Dr Maximus Johnity Ongkili said the ministry had already drafted plans to invoke WSIA if the agreement could not be materialised by July this year.

“We have no choice, but to invoke Section 114 of the WSIA for the benefit of the people. We will not entertain another request for an extension by the state or the concessionaire,” he said, adding that the restructuring plan has taken more time than it was supposed to.

The Selangor-Splash deal alone, Ongkili said, has delayed the restructuring plan for the last two years.