By Shazwan Mustafa Kamal
November 13, 2010
The Malaysian Insider

KUALA LUMPUR, Nov 13 — The Selangor government is planning a 100,000-strong protest to submit a memorandum to the Yang di-Pertuan Agong on December 5 over the federal government’s possible bailout of Syarikat Bekalan Air Selangor (Syabas).

Top Selangor Pakatan Rakyat (PR) leaders informed The Malaysian Insider last night that the state’s move was part and parcel of a plan to “pressure” the Najib administration not to proceed with a multi-million ringgit bailout of the state’s privatised water industry, and that state-wide ceramahs and gatherings had already been planned in advance to mobilise the numbers needed to attend the December 5 gathering at Istana Negara.

“We are planning a 100,000-people gathering on December 5 to submit (a) memorandum to the Yang di-Pertuan Agong on the water issue. Venue will be at Masjid Negara, 12pm.

“Details of memorandum has yet to be decided on but essence is demanding the return of rights of water to the rakyat, anti-privatisation. We want private (water) companies to be consolidated with the state,” said Petaling Jaya Utara MP Tony Pua.

The DAP national publicity secretary told The Malaysian Insider that the state government had planned 60 events from this week leading up to the date for the handing over of the memorandum.

“We have started the campaign to create awareness over the issue, prepared around 60 ceramahs around the state within the next three to four weeks. The ceramahs include with special focus groups, civil societies as well as church groups,” said Pua.

Sources told The Malaysian Insider recently that Selangor water bondholders will urge Prime Minister Datuk Seri Najib Razak to intervene directly in the state’s water restructuring deadlock in an effort to safeguard their bonds from being further downgraded.

The Malaysian Insider understands that major bondholders — including CIMB Principal Asset Management, Hong Leong Investment Bank and Great Eastern Life — have drafted a joint letter to Najib asking the federal government to bail out Syarikat Bekalan Air Selangor (Syabas) with a soft loan worth some RM1 billion.

In the letter, the bondholders contend that further downgrades of debt ratings will put capital markets at risk and will seriously impede the government’s effort to promote its Capital Markets Masterplan.

Putrajaya bailed out Syabas once already last year when it gave a RM320.8 million soft loan to parent company Puncak Niaga Holdings Bhd (PNHB) in December to help settle its debts to water treatment concessionaires.

It is understood that the bondholders intend to issue a separate letter to the Selangor state government by early December at the latest to push for a speedy resolution of the state’s water woes.

“The RM1 billion bailout reflects very badly on the Najib administration. We must be more competitive, transparent. What is happening is directly against the concept of the ‘era where the government knows best is over’. The government is taking people’s money to bail out weak companies,” said Pua.

He admitted however that initial response to the ceramahs so far has been “slow”, attributing it to a lack of planning on the part of the organisers.

“The kickoff to the ceramahs started this week, Tuesday night was in Klang at Dewan Hamzah. The preparations were not that well planned so the turnout was not that great. But I just came back from another function at Taman Sri Manja, Petaling Jaya Selatan, and there was quite a good turnout, between 300 and 400 people.

“During the talks and functions, we plan to zoom on the failure of Syabas to fulfil (the) concessionaire agreement, the history of privatisation, the high fees charged for privatised water in the country. We will also address the government’s multimillion bailout instead of forcing them to consolidate (assets of concessionaires) and place it under control, purview of the state government,” he added.

Contacted by The Malaysian Insider, Selangor state executive councillor Teresa Kok confirmed the state government’s plans.

“I confirm the information, yes. I suggest you come and cover the function of the meeting between the mentri besar and local councillors and ketua kampung in Selangor tomorrow 3pm at Klang land office hall. You will know our plan better (then),” Kok told The Malaysian Insider.

Both Kok and Pua are senior leaders in the DAP, which forms PR with PKR and PAS.

Selangor’s water players — Syarikat Bekalan Air Selangor Sdn Bhd (Syabas), Puncak Niaga Sdn Bhd (PNSB), Syarikat Pengeluaran Air Sungai Selangor Sdn Bhd (Splash) and Konsortium ABASS — are at risk of debt payment default as water bonds approach their maturity dates.

The debt service problem started when Syabas was barred from implementing a 37 per cent tariff hike agreed upon in January 2009, after the Selangor government claimed the sole water distributor had not done enough to reduce leakages which cost the state millions.

This in turn led to payment problems between Syabas and water treatment concessionaires PNSB, Splash and Konsortium ABASS, who supply it with treated water.

All four term-loan borrowers are already in technical default following their inability to maintain six months’ worth of reserves in a special account used to pay bondholders. The shortfall is understood to be some RM50 million, although this deficit could double in six months.

The technical default triggered a downgrade of the debt issuances by Malaysian Rating Corp Bhd (MARC) and RAM Ratings Services Bhd on September 8, who warned of further multiple-notch downgrades in this quarter. An industry source told The Malaysian Insider that bondholders suffered RM457 million in mark-to-market losses following the downgrade.

Syabas, PNSB, PNHB, RUN Holding SPV Bhd (RUNH), Splash, Viable Chip (M) Sdn Bhd (VCSB) and Titisan Modal (M) Sdn Bhd (TMSB) were downgraded by MARC while RAM cut ratings for Splash and Taliworks Corp Bhd subsidiaries Destinasi Teguh Sdn Bhd and Sungai Harmoni Sdn Bhd.

A statement by MARC at the time urged the federal and state governments to urgently interfere in the water industry’s restructuring negotiations to prevent a free fall of ratings in following months.

PR leaders have insisted that a bailout would only rescue Barisan Nasional (BN) “cronies” who have profited “tremendously” from the government’s privatisation exercise.

PAS MP Dr Dzulkefly Ahmad, in a blog posting earlier this week, urged Energy, Green Technology and Water Minister Datuk Seri Peter Chin to invoke sections within the Water Services Industry Act (WSIA) 2006 to allow consolidated management of water in Selangor, as well as other states.

“The minister must invoke the provision of sections 113 and 114 to intervene and safeguard the greater interest of the people of Selangor, Putrajaya and Kuala Lumpur so as to put the long-drawn fiasco to rest once and for all, in the true spirit and purpose of the enactment of WSIA, 2006 and the legislation of SPAN, 2006, which is to have a holistic and consolidated management of water in all states,” said the Kuala Selangor MP.