LETTER | We refer to the article published by The New Straits Times on Aug 8 where former Selangor menteri besar, Abdul Khalid Ibrahim made the claim that Selangor will end up paying 10 times more than the company’s actual value.
Air Selangor wishes to state that such a claim is patently wrong.
Calculation of Splash's value
The value of Splash is not RM250 million.
This figure of RM250 million was derived by applying a 12% return on the equity invested by Splash shareholders from the start of the Splash concession in January 2000 until a cut-off date of Dec 31, 2012.
The dividends paid out before the cut-off date was then deducted from the resulting figure to arrive at a final figure of RM250 million.
It was this figure of RM250 million that was offered to Splash shareholders in 2013.
Based on the audited financial statements of Splash, its net book value as at March 31, 2013, amounted to RM1.84 billion.
The offer of RM250 million first made in 2013 represented an 86 percent discount of the net book value of Splash.
The Splash acquisition is being undertaken on the principle of willing buyer, willing seller.
For such a transaction to take place, both the buyer and the seller must be willing before any acquisition can be concluded.
Over the last five years since 2013, Splash shareholders have consistently rejected the possibility of selling Splash at RM250 million, in light of the large discount to its net book value.
Arising from the five-year delay, the debts owed to Splash for sale of treated water has since ballooned to RM4.7 billion, which led to Splash commencing legal proceedings in April.
Verification of net book value
The net book value of Splash has been verified by no less than three independent parties: -
In all the three cases highlighted above, the offer of RM2.55 billion made by Air Selangor represents a discount to the values ascribed.
The consideration of RM2.55 billion offered by Air Selangor on Aug 3 represents a 28% discount of the net book value of Splash.
As at June 30, the net book value of Splash amounted to RM3.54 billion.
It should also be noted that the offer made by Air Selangor only represents 54 percent of the debts owed i.e. a discount of 46 percent.
No special preference
Air Selangor also strongly refutes the accusation that special treatment is being given to Splash.
On the contrary, the discount applied in the Splash transaction is higher than the discount in the acquisition of Puncak Niaga (M) Sdn Bhd (PNSB) in 2015, the water treatment operator owned by Puncak Niaga Holdings Berhad.
In the PNSB transaction, Air Selangor paid a price equivalent to 0.86 times of the net book value of PNSB’s water concession business, i.e. a 14 percent discount on the net book value of PNSB’s water concession assets. In that transaction, Air Selangor did not acquire PNSB’s non-water concession assets.
In the case of the Splash transaction, the offer by Air Selangor represents a value equivalent to 0.72 times the book value of Splash i.e. a 28 percent discount on the net book value of Splash.
The benefits of acquiring Splash to facilitate the conclusion of the Selangor water industry restructuring are clear. These include the following: -
All the benefits highlighted above will not be available until the acquisition of Splash is concluded as part of the final stage of the Selangor water industry restructuring.
The sole shareholder of Splash, Syarikat Pengeluar Air Selangor Holdings Berhad has since on Aug 9 accepted the offer by Air Selangor.
With this acceptance, the restructuring of the water services industry in Selangor, as well as the Federal Territories of Kuala Lumpur and Putrajaya, is expected to be completed by the end of 2018.
The writer is the chief executive officer of Pengurusan Air Selangor Sdn Bhd.
The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.