Kota Kinabalu Water Supply Project

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In December of 1992, Jetama Sdn Bhd was awarded a 20-year build, rehabilitate, operate and transfer concession contract by the Sabah State Government for the bulk supply of treated drinking water to the west coast of Kota Kinabalu. The project was part of a larger package for the privatization of the supply of treated water to Sabah, while distribution was to remain under the authority of the Sabah Water Department. The other two concession holders were Timatch Sdn Bhd which supplied treated water in Tawau and Sandakan, and Lahad Datu Water Supply Sdn Bhd, responsible for Lahad Datu and Semporna. The project comprised the operation of five existing treatment plants at Kasigui, Telibong, Papar, Tamparuli and Tuaran, which had a combined capacity of 132,500 cubic meters per day of potable water. The project also included the construction of new facilities, to take place in 2 phases, and included a 110,000 cubic meters per day water treatment plant, the Babagon Dam, to provide sufficient water reserve; installation of 120km of pipelines; and the construction of six ground concrete water tanks. Jetama Sdn Bhd was the project company owned 35% by Suez Lyonnaise des Eaux (renamed SUEZ in March 2001), 35% by Hume Industries Group Bhd. of Malaysia, 20% by the Government of Sabah, and 10% by John Holland Bhd. of Malaysia. In November of 2000, Hume Industries Bhd. sold its 35% stake in Jetama to the Government of Sabah for RM65 million. John Holland Bhd. was to design and construct RM361 million (US$141 million) worth of the new water supply and treatment systems over four to six years from the beginning of the contract. Lyonnaise des Eaux-Dumez, the local operations subsidiary of Suez Lyonnaise des Eaux, was to operate and maintain the water treatment facilities, the primary network, service reservoirs and impounding reservoir, the Babagon Dam, as well as associated structures and pipelines. Operations commenced in June 1993. The financing of the project was achieved in April 1993 when Jetama Sdn Bhd signed a RM166 million (US$64.7 million) longterm financing agreement with a group of financial institutions. Bumiputra Merchant Bankers Bhd (BMB) was the agent bank of the syndicated loan. Total paid up capital was RM73 million. The bulk sale contract had an annual value of US$19.9 million. By the end of 2003, the Sabah state government owed a total of RM648.76 million to the three water concessionaires in the state, RM258.39 million of which was owed to Jetama Sdn Bhd. The problem was that revenue from bill collections was lower than the amount the government had to pay to the three companies for treatment, mainly because the state-owned distribution company had been unable to control unaccounted for water (UFW) and collect tariffs from consumers. To resolve this issue, the Sabah state government sought to privatize the distribution system beginning in 2002. However, negotiations failed and as of 2005, the government was still trying to resolve the problem.