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Malaysia Government to Take Control of Selangor Water Assets

April 8 (Bloomberg) -- Malaysia’s federal government will assume control of water operators in the opposition-controlled Selangor state after rationing affected the region that surrounds Kuala Lumpur for more than a month.

The Cabinet decided at its April 4 weekly meeting to seize control of all four water concession companies and a water licensee in Selangor to ensure secure and sustainable supply, Maximus Ongkili, Minister of Energy, Green Technology and Water said in a statement yesterday. Companies including Gamuda Bhd., Kumpulan Perangsang Selangor Bhd. and Puncak Niaga Holdings Bhd. are being asked to sell their interests. Their shares fell.

Prime Minister Najib Razak’s administration agreed in February to inject funds to help take over the water assets after prolonged drought led to rationing in parts of Selangor. The state’s Chief Minister Khalid Ibrahim has been trying for years to nationalize water-treatment assets in Selangor to restructure the industry and help tackle periodic shortages.

“The federal government does not wish to allow the protracted negotiation on the restructuring of the water industry between the Selangor government and the concessionaires, as well as the ongoing water supply crisis plaguing the three regions to cause the people and the national economy to suffer,” Ongkili said.

Shares of Gamuda closed 3.7 percent lower in Kuala Lumpur today, while Puncak Niaga declined 2 percent and Kumpulan Perangsang fell 0.7 percent.

Asset Buyout

The two governments in February agreed to pay a combined 9.65 billion ringgit ($3 billion) to the water concessionaires to buy out their assets. Selangor also gave the go-ahead for an additional water treatment plant after agreeing to an action plan with the federal government.

A total of 821 project applications were put on hold as of end of March in Selangor, Kuala Lumpur and the administrative capital Putrajaya due to water shortage, the minister said. Ongkili will decide when the government will take control of the assets.

“The federal government feels that it has a certain amount of duty, as the water privatization was done under their hands, which is getting sour now,” said Ang Kok Heng, who helps manage $428 million as chief investment officer at Phillip Capital Management Sdn. in Kuala Lumpur.

To contact the reporter on this story: Chong Pooi Koon in Kuala Lumpur at pchong17@bloomberg.net

To contact the editors responsible for this story: Shamim Adam at sadam2@bloomberg.net Madelene Pearson, Suresh Seshadri

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