The Penang government is expected to retain control over any future revision in water tariffs in the state despite the transfer of its core assets in Perbadanan Bekalan Air Pulau Pinang to federal- backed Pengurusan Aset Air Bhd.

Penang would also be provided with a RM1.2 billion grant for the expansion of Mengkuang Dam which would see its present capacity of 23 million cubic metres expanded to 78 million cubic metres to help meet the state's water needs by 2020, said AmResearch Sdn Bhd.

"On the flip side, the federal government would be responsible for the source work of water supply projects including the funding, upgrading and development of water infrastructure in Penang," it said.

In its Sector Report on water, the research house of AmInvestment Bank Group said that under the water restructuring agreement to be signed today, both parties would also agree to undertake a complete restructuring of the outstanding water-related federal loans owed by the Penang government.

"Specifically, the Penang government's outstanding federal loans of RM655 million will be interest-free and further rationalised. Previously, the state's loan was to be charged at three per cent per annum," it said.

Further details of the agreement remain sketchy at this juncture.

- Bernama