Pua: Water bonds premium price abuse of public funds

By Yow Hong Chieh | May 27, 2011
The Malaysian Insider

KUALA LUMPUR, May 27 — The federal government’s decision to buy back Selangor water bonds at a significant premium is not only an abuse of taxpayers’ monies but borders on the outrageous, Tony Pua has said.

Quoting The Edge Financial Daily, the DAP publicity chief said the RM6.5 billion rescue deal will see Putrajaya acquire the bonds for 94.49 against a mark-to-market value of only 54.54 at the end of last month, or 73.2 per cent above market value.

Pua (picture) said the bond buyback, which will be done through the Water Asset Management Company’s (PAAB) wholly-owned unit, Acqua SPV Bhd, was akin to the bailout of Malaysian Airlines System Bhd (MAS) in 2000 when the government paid 121 per cent above market value for Tan Sri Tajuddin Ramli’s shares.

Putrajaya has also not been clear on how it plans to restructure Selangor’s water industry in line with the Water Services Industry Act 2006 after taking over the debts and whether water concessionaires will be required to repay the government, he said.

The Petaling Jaya MP said it was inexplicable that the government would settle outstanding bonds of privatised water companies when the companies’ shareholders should be taking responsibility for their own debt.

“In fact, when these companies were profitable, they have declared handsome dividends for their shareholders. Among the concessionaires, Syarikat Pengeluaran Air Sungai Selangor Holdings (Splash), whose parent company is Gamuda Bhd, declared dividends of RM578.6 million in 2007 while Puncak Niaga Holdings Bhd (PNHB) had declared dividends amounting to RM214 million between 2006 and 2010,” he said in a statement today.

“The above certainly makes true the dictum of the BN government privatising profits and socialising losses by taking over the debt burden of these companies.”

Pua said that Energy, Green Technology and Water Minister Datuk Seri Peter Chin should disclose terms of the bailout as it will affect the basic right to water of Selangor, Kuala Lumpur and Putrajaya residents, as well as billions of ringgit in taxpayers’ monies.

  1. #1 by Godfather on Friday, 27 May 2011 - 3:21 pm

    Then find a way of stopping it. Find out who the bondholders are, and why they need to be bailed out at the inflated price. If they had marked to market the price of the bonds, then paying the extra 73 pct above market value would allow them to write back their investment at extraordinary profit.

    Going after Gamuda or Puncak Niaga is useless – they have already taken their profits out long ago through the construction contracts and through inflated O&M contracts.

  2. #2 by Bigjoe on Friday, 27 May 2011 - 4:24 pm

    What I have yet to wrap my head around is the reason given for this bailout – that if not done, it will raise the premium on Malaysian corporate bonds in general. The bonds were downgraded and yet there was no corporate bond crises. Even if the company defaulted, any spillover effect on legitimate non-crony companies would be limited.

    The fact of the matter is this is cronyism, Mahathirism alive and well..

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