KUALA LUMPUR: Pengurusan Aset Air Bhd (PAAB) confirmed that MMC Corp Bhd, the flagship company of the influential Tan Sri Syed Mokhtar Al-Bukhary, has made an unsolicited offer for the two to establish a joint venture to own the country’s water assets.
In a brief reply to questions from The Edge Financial Daily (TEFD), PAAB confirmed that it attended a presentation on the possibility of co-owning the water assets by executives from MMC. However, PAAB said it is not seeking a partner to own the water assets.
“At this point in time, PAAB does not need a partner to take over the water assets nationwide,” PAAB said in a reply via email. When questioned on the gist of the presentation by MMC, the reply stated that it was for “MMC to form a JV company with PAAB”.
On the possible structure of the joint venture, PAAB replied, that “The structure was as presented by MMC during their presentation”. PAAB also said there was no deadline given for it to revert to MMC on its offer.
MMC executives declined to comment to TEFD. MMC has its mainstay in port and power. It also has an interest in treated water operations via Aliran Ihsan Resources Bhd, which is one of the two concessionaires in Johor.
On July 9, MMC, which already controls 62.82% of Aliran Ihsan, proposed to take the company private via a selective capital reduction and repayment exercise. TEFD reported on Monday that MMC had made a presentation to several government bodies — including the Ministry of Finance, Ministry of Energy, Green Technology and Water and PAAB — revealing a proposal for the formation of a special purpose vehicle (SPV) with PAAB to co-own the country’s water assets.
PAAB is wholly-owned by the Minister of Finance, Inc and was set up in 2006, for the federal government to own all water assets nationwide via PAAB and regulate the industry. The water assets, however, would continue to be operated by the concessionaires.
PAAB was set up because most state governments, which own the water assets, had run up huge debts and unable to pay the concessionaires who operated the water treatment plants. The states were also unable to spend on capital expenditure to replace leaking pipes reduce the level of non-revenue water (NRW).
As at end of last year, five states, namely Negri Sembilan, Melaka, Johor, Perlis and Penang have given up their assets to PAAB. Perak joined the bandwagon by signing up with PAAB in May.
Although the overtures made by MMC are only at a proposal stage, it nevertheless has got the attention of the water industry as well as Corporate Malaysia. This is because Syed Mokhtar via his listed companies has been scooping some of the best assets that has come into the market in the past two years.
Within the last two years, DRB-Hicom Bhd has acquired both Pos Malaysia Bhd and national automaker Proton Holdings Bhd from state- controlled investment arm water assets had piled up huge and were unable to pay the concessionaires who operated the water treatment plants.
The states were also unable to spend on capital expenditure to replace leaking pipes and reduce the amount of non-revenue water (NRW). As at the end of last year, five states — Negri Sembilan, Melaka, Johor, Perlis and Penang — had given up their assets to PAAB.
Perak signed up in May this year. Although MMC’s overtures are only at the proposal stage, it has got the attention of the water industry as well as corporate Malaysia because Syed Mokhtar has been scooping up some of the best assets that have come onto the market in the past two years.
DRB-Hicom Bhd has acquired both Pos Malaysia Bhd and National automaker Proton Holdings Bhd from sovereign wealth fund Khazanah Nasional Bhd. MMC has also been given the green light to conduct due diligence on KTM Bhd.
Syed Mukhtar is also said to be in the running to control the Penang Port. The Pakatan Rakyat-led government is resisting the move, and it has the support of the Penang Barisan Nasional.
He is also in telecommunications via Puncak Semangat Sdn Bhd, which was awarded the lion’s share of the LTE 4G spectrum, and he is now eyeing Tenaga Nasional Bhd’s 49% in Fibrecomm Network (M) Sdn Bhd.
Another flagship company, Tradewinds group has interest in property development, plantations, sugar refinery and the distribution of rice in the country.
This article appeared in The Edge Financial Daily on July 23, 2012.