Thursday, 10 April 2014 06:00

Water concessionaires may have to take 12% haircut

ASSET TAKEOVER - Offer price fair and consistent to resolve impasse, says Affin

WATER concessionaires in Selangor may accept a 12 per cent haircut of their assets to be taken over by the goverment, a local investment bank said.

A takeover price based on one-time net book value (1x NBV) of the concessionaires’ assets is seen as fair and consistent to resolve the state’s water impasse, said Affin Investment Bank Bhd.

Furthermore, such valuation method is in the spirit of “willing buyer-willing seller” principle, rather than a forced acquisition once the Federal Government invoked Section 114 of the Water Services Industry Act.

“While not ideal from a commercial stand point, we believe water concessionaires may be cajoled to accept this deal, which is viewed as consistent and fair in terms of valuation method.

“A consistent methodology (of 1x NBV) has been applied throughout the other states. We believe this may be the winning formula,” Affin Investment said yesterday.

It pointed that the Federal Government, through Pengurusan Aset Air Bhd, has been successful in migrating the water assets in Malacca, Negri Sembilan, Johor, Perlis, Penang and Perak in deals totalling RM8 billion since 2008.

The 1x NBV method can only apply to the three water treatment plants (WTPs) under Kumpulan Peransang Selangor Bhd’s unit Konsortium Abbas Sdn Bhd, Puncak Niaga Sdn Bhd and Gamuda Bhd’s 40-per-cent-owned Syarikat Pengeluar Air Selangor Holdings Bhd, Affin Investment said.

Syarikat Bekalan Air Selangor Sdn Bhd (Syabas), which is owned by Puncak Niaga Holdings Bhd and is the state’s only water distribution concessionaire, is excluded because it has a negative BV of RM1.9 billion, the firm noted.

A RM2 billion top-up offer by the Federal Government, together with the RM9.65 billion offered by the Selangor government to the four water concessionaires, could bring closure to the issue.

Affin Investment explained that of the RM9.65 billion offer, the residual “equity” attributable to the state’s water players, except Syabas was RM1.9 billion after deducting loans of RM7.7 billion.

“The offer (made by the Selangor government in February) was rejected as the ‘equity’ was significantly below the companies’ NBV (except for KPS),” it added.

Affin Investment said if the RM2 billion is used as a top up, the total offer for the three WTPs is about RM3.9 billion.

“We have excluded Syabas as its NBV is negative RM1.9 billion. Based on the estimated NBV of RM4.4 billion for the three WTPs, this implies that Puncak Niaga and Gamuda may take a 12 per cent haircut,” the firm added.

It said Syabas will likely get only the 12 per cent return on equity residual value of RM438 million per Selangor government’s RM9.65 billion offer, which is stated in the concession agreement in the event of an expropriation.


Full article:
Follow us: @MsiaChronicle on Twitter