Johor Water Supply

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In April 1999, Lambang Optima Sdn Bhd was awarded a 30-year concession contract to operate and manage Syarikat Air Johor Sdn Bhd (SAJ), the water supply network in the Malaysian State of Johor. The company was to manage 26 water treatment plants and improve water quality standards and reduce waste. The company committed to replacing almost 5,000km of pipes and to reducing non-revenue water (NRW) from 33% of output to 20% within 10 years. The company also had to bill its customers and collect tariffs. Johor had a population of 2.7 million in 2000 and 720,000 water connections, out of which 88% were domestic while 12.5% were commercial/industrial. To implement the contract, Sempurna Pelita Bhd. (later renamed Ranhill Utilities Bhd.) was created as the project company which was owned by Lambang Optima Sdn Bhd (80%) and the Johor state government-owned Yayasan Pelajaran Johor Corporation Sdn Bhd (YPJ) (15%) while SAJ employees held the remaining 5% stake. Sempurna Pelita Bhd (Ranhill) was to own and be known as SAJ Holdings. Lambang Optima was owned by two Malaysian businessmen, Datuk Hamdan Mohamad and Mohd Haniff Koslan, who respectively owned 70% and 30% equity in Insan Capital Sdn Bhd, which in turn owned 100% of Lambang Optima. The estimated total cost of the project was RM13 billion (US$3.4 billion) to be used for new capital expenditure and asset replacement. The expected dividend return of the project was RM8.5 billion. In February 2000, SAJ Holdings signed an agreement for a RM680 million (about US$179 million) Al-Bai' Bithaman Ajil Islamic debt securities issuance facility to finance the development and upgrading of the water facilities over the first three years of the contract. The facility was comprised of 5 tranches ranging from 6 to 10 years in annual increments. The facility received a long term rating of 'A' by Malaysian Rating Corporation Bhd. SAJ Holdings envisioned the use of funding as follows: RM114 million to develop water sources, RM328 million to improve the distribution system, RM219 million to control water loss, and the remaining amount would be used for rural water supply. Sempurna Pelita Bhd. took over operations of SAJ Holdings on March 1, 2000. In April 2002, the company was awarded the Malaysia Outstanding Water Award for Management by the Malaysian Water Association. In June of 2002, Sempurna Pelita Bhd. (then called Ranhill Utilities, the name of the listing vehicle) was listed on the Kuala Lumpur Stock Exchange (KLSE) main board, offering 26.5% of its equity to the public and raising RM192 million, 75% of which (or RM149 million) was to be used for capital expenditure in SAJ. Ranhill also allocated eight million new shares exclusively for its consumers in Johor. Following the listing, Ranhill Utilities was 60% owned by Lambang Optima Sdn Bhd and YPJ ended up with 13.5%. The company then began an expansion into other domestic projects and international projects. In November of 2003, Malaysian construction firm Ranhill Bhd. purchased 70% of Ranhill Utilities from Lambang Optima and YPJ. Before this purchase, Ranhill Bhd. did not have any Ranhill Utilities shares, even though both companies had common shareholders, including Ranhill President and Chief Executive Hamdan Mohamad. In July 2004, Ranhill Utilities issued RM1.28 billion (US$337 million) worth of 15-year Islamic bonds to fund the construction of additional water treatment plants in the concession area. As of 2005, SAJ supplied 1,258 million litres per day (mld) from 44 water treatment plants, each with a 1,595-mld capacity and maintained 469 reservoirs and more than 10,000km of pipe lines. Household consumption accounted for 60% of services and industrial consumption accounted for 40%. NRW had been reduced from 45% to 34.8% and SAJ reported it was on track to reduce that figure further to 20% by 2010 as originally planned. The coverage of water supply in Johor stood at 99.7% with 100% coverage in urban areas and 99% at rural areas, giving SAJ three million customers. To follow up JOHOR WATER RESTRUCTURING IN FINAL STAGE 170 words 5 March 2009 Bernama Daily Malaysian News BRNAMA English (c) 2009 Bernama - Malaysian National News Agency Discussions between the Ministry of Energy, Water and Communications, National Water Service Commission (SPAN) and the Johor state government on the restructuring of water assets are in the final stage. Energy, Water and Communications Minister Datuk Shaziman Abu Mansor said among the main topic of discussion was Pengurusan Aset Air Berhad's (PAAB) takeover of liabilities and water assets of the Johor state government and SAJ Holdings Sdn Bhd (SAJH). "Under the restructuring, SAJH's water concession will be terminated prematurely and the management of water in Johor will come under the jurisdiction of the Water Service Industry Act 2006 (Act 655). "SAJH will be issued an individual licence and monitored fully by SPAN according to terms and conditions of the licence," he said in his written reply to Liang Teck Meng (BN-Simpang Renggam). Liang wanted to know the status of discussions between SPAN and Johor with regard to a takeover bid of water services and assets by PAAB. -- BERNAMA AJA KHY JRL Document BRNAMA0020090306e535000dz