Wednesday 21 Feb 2024
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KUALA LUMPUR: The water impasse in Selangor looks set to prolong as the March 10 deadline for the acceptance of Selangor’s water restructuring has passed with no end in sight.

Puncak Niaga Holdings Bhd and Kumpulan Perangsang Selangor Bhd (KPS) yesterday accepted the offer, but with conditions, from Kumpulan Darul Ehsan Bhd (KDEB) to acquire their water assets.

However, the Selangor state investment arm failed to take over Syarikat Pengeluar Air Sungai Selangor Sdn Bhd (Splash) after the latter’s shareholders rejected the offer.

In an emailed response to The Edge Financial Daily yesterday, businessman Tan Sri Wan Azmi Wan Hamzah, who owns a 30% stake in Splash via The Sweet Water Alliance Sdn Bhd, said he was rejecting KDEB’s offer to acquire the entire equity interest in Splash for RM250.6 million.

“The Sweet Water Alliance will not be accepting KDEB’s offer to purchase our holding in Splash,” said Wan Azmi.

In a filing with Bursa Malaysia yesterday, Gamuda Bhd, which owns a 40% stake in Splash, said it was constrained from accepting the offer due to the “adverse consequences” on the company.

“The net offer of RM250.6 million for Splash compared to its net asset value (NAV) amounting to RM2.54 billion as at Dec 31, 2013 will result in a huge divestment loss of RM920 million to the
company. The offer of RM250.6 million is below 10% of Splash’s NAV.

“The offer is therefore not reasonable for acceptance by the company,” said Gamuda.

“Gamuda informed KDEB that what is currently offered is a 12% return on equity. By this, concessionaires whose concession period is short, are valued higher.

“On the other hand, companies with a longer concession period are valued lower such as Splash with 16 years left, is offered only RM251 million,” it said.

Puncak’s acceptance of the latest offer made by KDEB to acquire the entire equity interest in Puncak Niaga Sdn Bhd (PNSB) and 70% in Syarikat Bekalan Air Selangor Sdn Bhd (Syabas) came with a string of terms and conditions. They were similar to the terms and conditions in the two earlier offers made by the state investment arm last year.

“The [current] offers are nearly identical to the offers received on Feb 20 and Nov 21, 2013.

“The only difference between the current and the previous offers is the inclusion of the clauses on international arbitration under the Rules of London Court of International Arbitration and another clause on the agreement arising from the acceptance of the offers shall be governed by the laws of Malaysia,” Puncak said in a separate announcement to Bursa yesterday.

Puncak also stated that the decision to accept the offer was made without the presence of its largest shareholder and executive chairman Tan Sri Rozali Ismail. Rozali, who had abstained from deliberation and decision making of the special board, holds 41% of the company.

“The board after a full deliberation of the matters as enumerated above and after considering the inputs of Hong Leong Investment Bank Bhd, the adviser appointed by the board to assist and advise in evaluating the offers from KDEB, reached a decision that while the company is willing to accept the latest KDEB offers, the following [conditions] must be clarified/confirmed,” it said.

Among the conditions listed in Puncak’s letter to KDEB is demand for payment of total equity contribution to Puncak to include a compounded return of 15% per year taken as compensation for the company’s loss of future income as a result of the sale of its water concession business to the Selangor government.

In November last year, Selangor Menteri Besar Tan Sri Abdul Khalid Ibrahim said the Selangor government would offer RM9.65 billion to take over all four concessionaires in the state — Splash, PNSB, Syabas and Konsortium Abass Sdn Bhd.

Abass is controlled by KPS, which in turn is a 57.9% subsidiary of KDEB. KPS told Bursa yesterday that it had resolved to accept the offers by KDEB.

Puncak’s share price closed down one sen at RM3.35, while that of Gamuda fell three sen to RM4.65. KPS ended the day unchanged at RM1.87.

This article first appeared in The Edge Financial Daily, on March 11, 2014.

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