JOHOR BARU: Ranhill Holdings Bhd’s 80%-owned subsidiary SAJ Holdings Sdn Bhd, which supplies and distributes treated water to Johor, will submit its new three-year business plan — the fourth since it migrated to an asset-light model — to the industry’s regulator by the end of January next year.

The capital expenditure (capex) for the period beginning 2018 through 2020 will be finalised after discussion with Suruhanjaya Perkhidmatan Air Negara (SPAN), said SAJ Holdings chief executive officer Abdul Wahab Abdul Hamid.

All water companies that have surrendered their assets to the federal government will have to submit their periodic business plans to SPAN to get funding from Pengurusan Aset Air Bhd for their operations.

He said it might be slightly pricier compared with the recent average of RM200 million, given that Johor will need another new water treatment plant.

“The next three-year operating period actually begins in January 2018, but we need to submit our business plan to SPAN at least one year in advance so that we can sit down [with the regulator] to finalise the key performance indices, the required capex for the period, and so on,” he told pressmen at SAJ Holdings’ headquarters earlier this week.

Johor has the capacity to treat 1,986 million litres (mld) of water per day. Abdul Wahab said the new treatment plant, which is slated for completion in 2019, will add another 300 mld. “And with expansion works on our existing water treatment plants, we plan to increase our capacity, altogether, to 2,300 mld.”

It is still early to say whether there will be another round of tariff hikes, he said, as the new wave of business plan is not finalised yet. The last time Johor raised its tariff was in 2015, which was the first year of SAJ Holdings’ third operating period.

There will likely be no substantial increase in non-revenue water (NRW) reduction works in the fourth operating period though, as the cost of investing to do so may exceed the benefit gained.

Abdul Wahab said Johor has the third-lowest rate of revenue loss from producing treated water, at 25.6%, citing data from Malaysia Water Industry Guide 2016. Johor Baru, the state’s capital, has an NRW rate of 21%.

“Even by the end of next year, we can bring our NRW down to below the national target of 25% — which is SPAN’s aim for the year 2020,” he said. Before entering the 21st century, more than 40% of water treated in Johor was not billed to users.

Cutting down NRW costs SAJ Holdings RM40 million to RM60 million a year, on average. “At some point, the cost of investing in reducing NRW will be greater than the benefit of savings. We have not properly computed the figures, but offhand, I think Johor will reach that economic level when NRW reaches 23% to 24%.”