The Selangor government today moved to allay fears about the possible rating downgrading of Selangor water bonds, expressing confidence that talks to resolve the industry's restructuring exercise can resolve the current impasse.

khalid ibrahim selangor water In a statement issued today, the state’s Menteri Besar Abdul Khalid Ibrahim said his government is confident of solving the issues together with the federal government over the restructuring exercise as provided for under the Water Services Industry Act 2006.

Discussions are currently underway that will bring about a positive outcome and benefit the people while promoting the development of the industry, said Khalid.

“The resolution of the problem is by way of a holistic approach that takes into account the interests of all parties, including shareholders,” he added.

RAM Rating Services Bhd chief executive officer Chong Kwee Siong had warned last week that Selangor water bonds faces further rating downgrades if the discussion to resolve the industry's restructuring exercise remains at an impasse.

azlan Citing the July deadline when the first batch of bonds are due for repayment, Chong said that if payments are not made by the 19th of that month, “by rating definition, it is a default.”

"Therefore, there is a possibility the current rating could be downgraded further if there's no development on the restructuring exercise," said Chong.

In March, RAM maintained the Rating Watch with a negative outlook on the BBB3 ratings of the respective debt issues of Syarikat Pengeluar Air Sungai Selangor Sdn Bhd, Destinasi Teguh Sdn Bhd and Sungai Harmoni Sdn Bhd.

In his statement today, Khalid ( left ) said the Selangor government is still waiting for feedback from the Energy, Water and Green Technology Ministry to resolve the current water talks.

Recounting main developments, Khalid said the federal government had given the green light to the Selangor administration in January 2008 to consolidate holders of the state’s water concessionaires under its fully-owned subsidiary Kumpulan Darul Ehsan Berhad (KDEB).

NONE After Pakatan Rakyat took over the reins of government following the March 8, 2008 general election, the menteri besar decided on a restructuring of the water industry and offered the concession-holders a compensation of RM5.7 billion.

The concessionaires, however, rejected the offer on the grounds that it was insufficient to cover their debts amounting to RM6.4 billion.

Four months later, the Selangor government extended an offer amounting to RM9.3 billion in compensation, which was accepted by concessionaires Splash and Abbas.

In March, 2010, the federal government made the offer of RM10.3 billion, but even this rejected by Puncak Niaga Sdn Bhd (PNSB) and Syarikat Bekalan Air Selangor Sdn Bhd.

In January 2011, the Selangor government made another offer to take over water assets in the state by offering to engage international arbitrators to ensure the takeover was done “with integrity and fairness” to all concession-holders.

On claims that the state would face a water crisis, Khalid said he had asked the Selangor Water Management Authority (Luas) to carry out a study on the matter.

Based on the data obtained from the study, Khalid said the government is confident that the state has sufficient levels of raw and clean water.

According to him, Luas has also determined those water treatment centres and plants that have yet to be utilised to their optimum, which is the reason for the currently low water level.

“The Luas report clearly explains that raw and clean water supply is sufficient, but there is a problem with pipe capacity. This problem should be dealt with by the concessionaires in order to satisfy consumer demand.

“The state government will monitor the pipe problem, and it is confident that it can be resolved if the state government is empowered to take over water management in Selangor,” said Khalid.