Syabas Water Distribution Project

distressed

In September of 2004, the government of Malyasia awarded control of state-owned water distribution company Perbadanan Urus Air Selangor Bhd. (PUAS), to Syarikat Bekalan Air Selangor Sdn. Bhd (Syabas) under a 30-year concession contract. PUAS served around 5 million customers in central Selangor state and the federal territories of Kuala Lumpur and Putrajaya, the country's most populous and industrialized areas. In these areas, water treatment and extraction had been handled by the private companies Puncak Niaga, Syarikat Pengeluar Air Sungai Selangor Sdn Bhd (SPLASH) and Konsortium Aliran Bekalan Air Selangor Selatan Sdn Bhd (ABASS). However, water distribution and billing services were undertaken by PUAS prior to this project. Syabas formally took over the management of PUAS including all of its 1,500 employees on January 1, 2005 following the formal contract signing on December 15, 2004. Syabas was 70% owned by Puncak Niaga, Malaysia's biggest water treatment company, while state-owned Kumpulan Darul Ehsan Bhd held the remainder. PUAS had distributed 3.6 billion liters of water daily in Selangor and that amount was expected to rise by 200 million liters a day annually. Of the total treated water supply, 42.78% was lost annually due to leaking pipes and water theft, at a cost of MYR600 million a year. As a result, PUAS owed the three private water treatment operators, which included Puncak Niaga, a total of MYR2.23 billion in unpaid receivables as of August 31, 2004. As part of the deal, the government of Selangor subjected Syabas to a performance-based tariff adjustment structure. Syabas was to reduce NRW to 37.78% by 2006 from 42.78% at the time of the contract signing and meet a NRW target of 27.98% by 2009, 19.98% by 2012 and 15.48% by 2015. The company also had to meet other targets as well, such as actual capital expenditure, revenue collected and amounts paid for bulk water from its suppliers. If Syabas did not meet these targets, it would not be eligible to recieve approval for tariff increases. When Syabas did request a tariff review from the government, it was required to be backed by review documents, including statements of actual revenue and amount spent by the company in purchasing raw water. The total planned and committed capital expenditure was RM9.57 billion (US$2.52 billion), to be spent on capital expenditure for new and replacement water supply infrastructures over the 30-year life of the concession. In December of 2004, the Malaysian government concluded a deal that gave Syabas RM2.8 billion (US$729 million) of financial support including RM1.864 billion (US$491 million) of soft loans from Bank Pertanian & Industri Malaysia Berhad, and RM905 million (US$238 million) of Federal Government funding. The capital expenditure was also to be financed by tariff increases. In September of 2005, Syabas (Syabas) signed agreements for a facility of RM3.2 billion (US$850 million) worth of Islamic bonds with a consortium of banks including Bank Islam Malaysia Bhd, Bumiputra-Commerce Bank Bhd, Commerce International Merchant Bankers Bhd and HSBC Malaysia Bhd. The funds were to go towards capital expenditures in the Syabas Water Distribution Project over the following seven years. http://www.syabas.com.my/ http://www.syabas.com.my/main.php?pg_post=3&pg_id=2&menu_id2=38 None